FT report says FDIC talked about Pandit replacement if bank asks for more aid
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(NEW YORK) Citigroup Inc chief executive Vikram Pandit said he expects the No 3 US bank to rebound from its current woes and pledged that it would repay 'every dollar' it owes to the US government.
Mr Pandit commented on the bank's prospects yesterday at the annual shareholders' meeting, which came just days after the bank posted a US$1.59 billion first-quarter profit before payments of preferred dividends to the US Treasury.
'I intend to see this through,' Mr Pandit told shareholders.
Mr Pandit told shareholders that the bank's management has a 'sense of urgency'. 'I fully recognise the loss of value' that investors have endured, Mr Pandit said. 'Our own people have paid a dear and heavy price.'
The bank reported a US$1.6 billion first-quarter profit on April 17, thanks to trading gains and an accounting benefit for distressed companies.
The Financial Times newspaper reported that senior Federal Deposit Insurance Corp (FDIC) officials had privately discussed who might replace Mr Pandit if the bank needed more government aid.
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Citigroup has already taken US$45 billion of taxpayer money and may need more after the Obama administration reveals on May 4 how the 19 largest US banks fared on stress tests being conducted by the Federal Reserve, according to Christopher Whalen, a managing director at bank-research firm Institutional Risk Analytics in Torrance, California.
Mr Whalen says Citigroup, the third-biggest US bank by assets, will be 'ranked as one of the lowest' in the stress tests, which are designed to gauge whether lenders have enough capital to withstand a continuing economic crisis.
The Treasury Department, which will become the biggest shareholder in New York-based Citigroup when the bank converts as much as US$52 billion of preferred stock into common shares as soon as next month, may order the resignations of some long-serving board members to show they are accountable, according to Peter Sorrentino, a senior portfolio manager at Cincinnati-based Huntington Asset Advisors, which has about US$13.3 billion under management, including 1.5 million Citigroup shares.
'There has to be a cleaning of all that was at Citigroup,' Mr Sorrentino said. 'Anyone who was involved with the board in the lead-up to the crisis is tainted.'
Board members who 'sanctioned the risks that were taken and the business practices followed' will likely be replaced by the government by the end of the year, he said.
Meanwhile, Treasury Secretary Timothy Geithner yesterday defended the bank rescue programme devised by the Obama administration before the plan's Congressional Oversight Panel, saying it 'strikes the right balance' by letting taxpayers share the risk with the private sector while at the same time letting private industry use competition to set market prices for the assets.
His testimony came in the wake of a watchdog agency report that warned Obama administration initiatives could increasingly expose taxpayers to losses and make the government more vulnerable to fraud.
A special inspector-general assigned to the Treasury's US$700 bailout programme concluded in a 250-page quarterly report to Congress that the private-public partnership is tilted in favour of private investors and creates 'potential unfairness to the taxpayer'. -- Reuters, Bloomberg, AP
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