FDIC tries to push out Citigroup's Pandit
The FDIC has decided to try to oust Citigroup (C) top management, something that the Treasury, the Fed, and the Citi board have elected not to do. Some think Citi CEO Vikram Pandit has not been at the bank long enough to be blamed for most of its problems. Others do not want to disrupt the operations of the bank.
The actions of the FDIC is putting it at odds with other regulators who believe the agency is not in a position to press for change at a major money center bank, particularly one that is not on the brink of failure. Financial officials in the Administration are likely to have an ugly fight over the matter.According toThe Wall Street Journal, Citi management has taken the position that the FDIC does not have the authority to push the financial firm to do much of anything. The paper reports,"The FDIC is our tertiary regulator," behind the Office of the Comptroller of the Currency and the Federal Reserve, said Ned Kelly, Citigroup's chief financial officer.
But the FDIC is not the issue and neither are other regulators. The government has told Citi what it has to do to comply with "stress test" results and it is well on its way to do that. The government has asked the bank to recruit a new and more qualified board. It is close to achieving that goal. Now that a new board is being seated, the FDIC wants to tell the members that they have no power, particularly over its most important responsibility -- which is to name and support a CEO.
The FDIC is setting a bad precedent. Who wants to be recruited to serve on a bank board at the government's urging when the government wants to undermine the board's fiduciary role?
Douglas A. McIntyre is an editor at 24/7 Wall St.