Citigroup's Rubin Resigns
The former Treasury Secretary steps down from Citigroup amid rumors of a Smith Barney sale, giving investors serious doubts about a turnaround for the bank
Former Treasury Secretary Robert Rubin (left), director and chairman of Citigroup's executive committee, with former Fed Chairman Alan Greenspan. Chip Somodevilla/Getty Images
As director and chair of Citigroup's (C) executive committee since 1999, Robert Rubin has been on the scene for many of the big bank's biggest crises. But for all his cachet and political clout, Rubin was neither able to influence Citigroup for the better nor steer it out of harm's way.
"He ruined his career, he is resigning in disgrace," says Citi investor Richard Steinberg, of Steinberg Global Asset Management in Boca Raton, Fla. "I think one of the lessons we're learning from all this tumult is that people's reputations should only carry them so far in their responsibility to shareholders and management. There have been way too many free passes."
On Jan. 9, the 70-year-old Rubin announced his resignation from the bank, citing a desire to deepen his involvement in outside activities and organizations including Local Initiatives Support Corp., the largest community development organization, and Kofi Annan's Africa Progress Panel.
In a letter to Citi Chief Executive Officer Vikram Pandit, Rubin said when he joined Citi the company "had two CEOs and faced many strategic and structural challenges. From the beginning, my role, by being advisory, allowed me to act as a sounding board and advisor…The last 18 months have been very difficult throughout the financial system and this has had serious consequences for the employees and stockholders. My great regret is that I and so many of us who have been involved in this industry for so long did not recognize the serious possibility of the extreme circumstances that the financial system faces today."
The dual headlines have some investors convinced that their worst suspicions would be realized: that more bad news is in store for Citi shareholders. "When you look at the Rubin resignation in conjunction with rumors about this joint venture, it would lead me to believe more losses to come down the pipeline," says Bill Fitzpatrick of Optique Capital Management. "There has to be some accountability in terms of their leadership and that includes the CEO and the board of directors. If Rubin had stuck it out, I'd say he was in for the long haul and maybe there was a turnaround in store. When I see this, it's clearer that they'll have to raise more capital and so on. There will be more dead bodies."
Rubin has been criticized over the past several years for his silence as the embattled bank was hit with huge lawsuits, regulatory sanctions, and gargantuan losses. Few have been able to justify his outsize compensation package: For the duration of his tenure, Rubin earned some $115 million at Citi.
Prior to his stint at Citi, Rubin enjoyed a long and illustrious career, most notably at Goldman Sachs, where he worked for 26 years, and in federal government. He served as the 70th Secretary of the Treasury during both Clinton Administrations. At Citi, he has acted as the ultimate door opener, acting as a high-level liaison with the bank's top-shelf corporate clients as well as key government figures from all over the world.
Der Hovanesian is Banking editor for BusinessWeek in New York.