Citigroup CEO Steps Down
JACKI LYDEN, host:
This evening, Citigroup, the nation's largest banking company announced the resignation of its chairman. Charles Prince is the latest victim of the subprime mortgage crisis. The chairman of Merrill Lynch was forced out this past week. Citigroup suffered a $6.5-billion loss in the third quarter and more losses are feared.
NPR's Jim Zarroli is covering this story.
Jim, the board of Citigroup held an emergency meeting today. Has there been an official announcement about Mr. Prince and who would replace him?
JIM ZARROLI: Yes. The company has said that Charles Prince stepped down, as was pretty widely expected. Robert Rubin, the former Treasury secretary under President Clinton, will be chairman, and a Citibank executive named Win Bischoff will be the interim CEO.
There have also been reports that Citigroup is planning to announce billions of dollars in additional losses sometime over the next few days.
LYDEN: Remind us, Jim, how Citigroup's losses are tied to the subprime crisis.
ZARROLI: Well, the subprime crisis basically began because a lot of bad mortgages got written and there were a lot of foreclosures that came out of that. A lot of investors who had put money into mortgages lost money.
Now, these investors included hedge funds, they included pension funds, mutual funds, some individuals and a lot of banks. Really all of the big Wall Street banks were invested in mortgage-backed securities. Some of them like Goldman Sachs managed to survive pretty well. They didn't lose all that much money.
Others like Merrill Lynch and Citigroup did have big losses. They've recently come forward and announced big losses. In the case of Merrill and Citigroup, too, the losses turned out to be even bigger than they first estimated.
LYDEN: What was Charles Prince's responsibility in all of this? Is he an advocate of investing this way?
ZARROLI: Well, you know, Prince has faced criticism really ever since he took the job. He succeeded Sanford Weill who was kind of a Wall Street legend. Prince wasn't really considered a strong leader by a lot of people. You know, Citigroup is a big, unwieldy company. A lot of people think he didn't have the vision to run it well. And when the stock price went down as much as it has, this year it's down 30 percent, those criticisms began to stick.
With the subprime losses, the rap on Charles Prince was that you might say he was sort of asleep at the switch. I mean, he was saying for a long time, as recently as May, that this wasn't going to be a big problem when to a lot of analysts it looked like, you know, it was a very serious problem.
LYDEN: What can Robert Rubin do when he takes over to stem Citigroup's losses?
ZARROLI: Well, Citigroup has just a lot of problems right now starting with these losses. So far these losses aren't that big for a company as big as Citigroup, but the people are nervous about what else is out there.
So Rubin has to kind of calm the markets. Citi also has problems with what are called specialized investment vehicles, which are kind of a method of pushing losses off the balance sheet. They're making people nervous. And then there are just long-term problems about Citigroup's strategy. Is it too big? This is a company that employs 300,000 people. It operates in a hundred countries. So there are sort of strategy questions they have to answer.
LYDEN: NPR's Jim Zarroli in New York.
Thanks very much, Jim.
ZARROLI: You're welcome
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