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The Most Powerless Powerful Man on Wall Street

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Rubin ultimately prevailed, and the board of directors at Citi agreed to make Pandit CEO in December 2007. A confidant warned Pandit that he should think twice about taking the job. Citigroup was an unwieldy monster: A so-called financial supermarket built by Sandy Weill out of the merger of Travelers Group and Citicorp in 1998, Citi had a global reach that, in theory, was supposed to give it extraordinary leverage. But with the credit markets collapsing, the bad parts could start bringing the good parts down with them. The conversation over whether the business model was still relevant was reaching a fever pitch.

“Vikram, this is impossible,” the confidant said. Pandit replied, “No, this is a terrific opportunity.”

Pandit would be the leader of the biggest bank in the world, what amounted to a small country, population 350,000, and he would have at his disposal four airplanes, a helicopter, cars and drivers, chefs, dozens of aides, and the ear of the White House. Better still, running Citi would be his chance for redemption after missing his shot at Morgan Stanley. Once the deal was done, Rubin personally went from division to division praising Pandit to staffers.

Pandit laid out an ambitious three-year plan for Citigroup’s future: centralizing management, restructuring, selling billions in assets, and raising capital as a buffer against further credit collapse. (Rubin personally cruised a golf course with Prince Alwaleed bin Talal in Abu Dhabi to procure a $7.5 billion investment.) Pandit studiously read books on Citibank history, hoping to divine a common thread running from the company’s roots as City Bank of New York in 1812 to its present incarnation and perhaps gain an inkling of the pride he’d felt for Morgan Stanley. He brought in long-retired Citi executives to talk about the old days and reanimated the company’s seventies ad campaign, Citi Never Sleeps, to try to recapture its past glory.

“The funniest blog was e-mailed to me by a friend,” jokes the Citi CEO. “ ‘Pandit Gets to Keep His Crappy Job.’ ”

The main issue on the table was whether the “supermarket” model could be maintained. One trusted associate advised Pandit that he had to break up the company to make it work. Consultants from McKinsey & Co. offered the same suggestion in a report. Pandit rebuffed those suggestions. Some say that breaking up Citigroup was never truly an option. A senior executive at the company suggests Pandit had an implicit directive from the board of directors, especially Rubin, to keep Citigroup together, thereby preserving the legacies of founder Sandy Weill and Rubin himself. Rubin and Weill had been friends since the late nineties, when Rubin served in the Clinton administration. It was Rubin who helped push through the Gramm-Leach-Bliley Act that effectively allowed the merger of Travelers and Citicorp. A year later, Weill made Rubin a board member at the company he helped create, paying him a salary of $17 million a year.

Pandit chose to embrace the challenge of Citi in the only way he knew how: He elevated his Old Lane team to positions of power, bringing in Don Callahan, who had been working in marketing at Credit Suisse, to be his chief administrative officer and promoting Havens to head of investment banking. (Ramakrishnan opted to remain in the offices of Old Lane.) Perhaps the most powerful member of Pandit’s circle of lieutenants—which became known as the “Gang of Five”—however, wasn’t a Morgan Stanley alum but Lewis Kaden, a loyal Rubin associate. Kaden, a lawyer who’d worked for the powerful DC firm Davis Polk & Wardwell, had been friends with Rubin since the eighties, when Rubin was head of Goldman Sachs. Now he was involved in everything from the $400 million Citi Field naming project to negotiating with government officials, in addition to penning Rubin’s correspondence. A common internal joke at Citi was, “If Bob Rubin turns a corner too fast, Kaden breaks his nose.”

Pandit often stayed in his corner office on Park Avenue for hours, Kaden and Callahan serving as his links to the outside world. When one senior executive finally met with Pandit, both Kaden and Callahan afterward gave opposing takes on what Pandit had meant. At a time of duress, Pandit appeared disconnected from his staff. On Pandit’s trip to Baltimore last year with the head of Citi’s investor relations, there was a third passenger onboard the company helicopter to whom Pandit didn’t say a word. When the investor-relations man finally asked which division of Citi he worked in, they learned that he was a stranger who had accidentally boarded the wrong helicopter.

To Pandit’s mind, traditional morale-building leadership had always been an ephemeral concern. He knew he was no inspirational leader, instead seeing his mission as keeping the troops at bay while he spent his time making sense of what was happening to the banking industry. Messy human affairs were best outsourced to his trusted soldiers. But the perception that Pandit was hunkering down with select lieutenants gave way to accusations of cronyism by people who felt he was not taking advice from longtime Citi executives, including Michael Klein, Citi’s vice-chairman, and Sallie Krawcheck, the head of wealth management.


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