Bob Rubin is leaving Citigroup Inc. in very different circumstances than when he joined it some nine years ago. Back then, Citi was on top: founder and co-chief Sandy Weill had just created a global megabank that many wanted to emulate, a one-stop financial services firm. Adding the former treasury secretary and Goldman Sachs Group Inc. boss was a PR coup.
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Within days Citi’s stock had jumped another 25%. Rubin had, as Weill put it at the time, “the best job in the company. He has no line responsibilities, yet has full participation… He will be in the loop on everything that happens with John (Reed, then co-chief) and I.”
Rubin became their consigliere, a role he retained when first Chuck Prince and then Vikram Pandit took the top job. According to Citi, his advice revolved around careful risk-reward judgements, having the right people in place and having the right oversight.
But that wasn’t enough to prevent Citi from lurching from crisis to crisis. There were questionable business dealings with Enron Corp., WorldCom Inc. and Parmalat SA; the Dr Evil trade in bonds that cost the bank much goodwill, and business, in Europe; the enforced closure of its private bank in Japan due to legal violations; being banned by the Fed from making acquisitions for a couple of years due to inadequate risk management; and $45 billion (Rs2.2 trillion today) of write-downs on toxic leveraged loans and mortgage-related assets that led to multiple emergency capital raises and two government bailouts.
It would be harsh to blame Rubin directly for many of these, if indeed any of them. But all in all they make a sorry litany of institutional failure, and yet he was paid handsomely—more than $100 million since 1999—as Citi spluttered. And he did anger investors in late 2007 by stating publicly that embattled boss Prince would be at the helm for years. Refusing to take on more than a temporary executive role after Prince left just when the bank needed someone with his expertise also did not go down well in some quarters.
Regardless of how one assesses his culpability, though, or his ability to provide useful advice, Rubin has become a lightning rod for all Citi’s current woes. It’s right for him to go.