Citigroup: Too Big to Succeed?

Citigroup: Too Big to Succeed?

Excerpt:

Which brings us back to Mr. Pandit's task, which we hope includes an assessment of whether Citigroup is too large considering its persistent ill-management. Mr. Weill made a bundle building Citi into a financial conglomerate, but the bank has run into problem after problem. From the sovereign debt crisis of the 1980s, to its entanglement in Enron's fraud, and now subprime and the SIVs, Citi has shown a knack for finding the middle of whatever financial mess is in the news. Over the years, Citi's size has not so much provided stability as a place for problems to hide.

Many of the company's units continue to be great businesses, and they could be sold off to raise further capital. Certainly, that would be better than having to resort to a taxpayer rescue. Making Citigroup smaller would also reduce the moral hazard that attends the belief that it is too big to fail.

Mr. Pandit presumably won his job by convincing the board that he wanted to run Citi, not dismantle it. But he's also a newcomer to the company, so he is in a position (with help from regulators) to take a dispassionate view of whether the Citigroup of today makes sense. If it has become too big to fail but too large to succeed, a breakup might be better for all concerned.

Comment: See earlier CFG posting: The Fool: Split up Citigroup