The Real Scandal at Citi

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And the source says the cost to remodel Thomson's office was modest compared with what some other Citi executives have spent. Thomson's defiance of Prince's edict was the final breach, the executive maintains. Citi director Anne Mulcahy, the CEO of Xerox, says: "Chuck made the appropriate call."

Slicing the Budget

Whatever the cause of the firings—and the source of the leaks—the PR fiasco has hurt Prince's image among some shareholders, analysts, and employees.

In some ways, Prince, 57, has been his own worst enemy. He has promised since 2004 that revenue growth would exceed expense growth, but it hasn't happened. By contrast, from 1999 to 2004, the company boosted revenues by $22 billion, while expenses increased by $8 billion. Last year, earnings fell by 8.7%, well off the double-digit growth during the Weill era.

In December, Prince cut his promised $1 billion investment budget in half. He says credit worries are one reason to hang on to the purse strings a little tighter now. "A responsible manager spends the money when you have it and pulls in a little bit when you don't have it," he told BusinessWeek in January. "That's the right way to run the railroad."

But Prince's about-faces make it difficult for analysts and investors to know which way the trains are moving. "The problem is that the company has not kept its promises," says analyst Joseph Dickerson of Atlantic Equities in London.

The Clock Is Ticking

Prince has made some progress. In the last year, he has built 1,165 retail bank branches globally, one of the biggest expansions in the history of banking. That will allow Citi to draw more funds from deposits and rely less on the markets, lowering its cost of capital. He has reduced the number of data centers from 52 to 42, allowing for savings of up to $2 billion by 2009. And by the end of the first quarter, COO Druskin will present a plan for a major overhaul to wring still more savings out of Citi's bureaucracy.

But the clock is ticking. Given the poor track record and growing disarray, some Wall Street veterans think Prince himself will be out by the end of the year if conditions don't improve significantly. Others give him until his five-year anniversary in October, 2008. "Something's got to give," says a Wall Street veteran. "The status quo is untenable."

Such negative sentiment is not universal. If it were, Prince would be gone by now. "I'm very nervous about talking about the end of Chuck Prince," says Howard K. Mason, senior analyst at Sanford C. Bernstein & Co., a blue-chip research firm in New York. "I don't think the groundswell of resentment and disappointment is enough to shift the board."