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Charlie Rose had an hour long interview last night with Vikram Pandit, the CEO of Citigroup. While I might wish for a more incisive interviewer, I think it is important and instructive to listen to the movers, shakers and major players in the current financial meltdown. This can be, and often is, a depressing experience. At first glance, Vikram Pandit comes across as a bland technocrat who is very good at what he does but doesn’t seem able to see beyond the glasses on his nose. Despite this general inoffensiveness, there was something jarring about his performance, as if I was watching someone slightly out of phase with reality. This brings up the question for me that I often have about Paulson or Bernanke: Is this guy lying or just in deep denial? In Pandit’s case, it’s easier to say because he has a tell. He is just a little too glib, a little too artful in repeatedly dodging questions. The bland persona he wears like a well tailored suit can obscure but not hide that he is perfectly aware of what happened at Citi and what his role was in it.
During the course of his interview, Pandit throws out that he was only at Citigroup for eleven months, since December 2007, that he didn’t cause the problems at Citi, and that he is one of the good guys trying to clean up the mess there. A little history: the first Bear Stearns funds failed in June 2007 but the bursting of the housing bubble which kicked off the current financial collapse didn’t happen officially until the panic that ensued following the freezing of the three BNP Paribas funds on August 9, 2007. Pandit was brought in to head Citi after this precisely because the bank was losing money from its exposure to the housing market. Nor was he some guy pulled in off the street. He had headed the investment banking arm at Morgan Stanley from 2000-2005. If anyone knew what was going on with the bursting of the housing bubble and the subsequent meltdown, he did because he had played such an instrumental role in causing both. So let’s be clear about this. Vikram Pandit knew from the day he entered the door at Citi that the bank was insolvent, indeed that most of the financial system was. What he and so many others in this crisis have done is dance madly around this core fact trying to get us to forget it.
Pandit never says the system is broken and the banks are broke. No, it’s about confidence. He would have us believe that it is all psychology, that it is all about us, that Citi is, in fact, fine, that it is we who are not. These are by the way the standard baggage of the con artist and snakeoil salesman. It’s not about me. It’s about you. It’s not about this. It’s about that. And for goodness sakes, don’t believe your lying eyes. Trust me on this. Deflection, misdirection, sell the story, forget the truth.
Pandit did this throughout his interview. When asked if companies that are too big too fail are maybe too big, period, he responded that no, Citi’s size did not mean it couldn’t be managed effectively. He said this the day after Citi received a $306 billion bailout and $20 billion investment from the US government. And about that, Pandit didn’t describe the bailout as a bailout. Instead he said that Citi had purchased “insurance” from the government on $306 billion of its assets. That is a truly incredible statement. How many of us out there, do you think, would be allowed to buy fire insurance on a house after it had burned down? But Pandit’s deceit and dishonesty does not end there. Although he can’t give a precise number, he says the face value of these assets was around $340-$350 billion so really the government is getting a good deal because the government gets to insure them at a discount. But the discount is only 9-12.5%. Some of those assets may have a value that is zero. For the mortgage related ones, their real value is at a minimum 40% off their face value. So no, it is not a good deal. We are getting rooked, a surprise I know. But that’s the essence of a con to get the mark to think he/she is putting one over on the con man even as the con man is putting one over on them.
In other observations, Pandit opines that no one could have predicted what happened to financial markets, that it was unprecedented. I always find this contention a bit strange and strained seeing as there were those of us out here who, in fact, did predict this and that it wasn’t that we were so smart but that it was just so eminently foreseeable. Rose throws up his hands and says yes, but if no one could imagine it then isn’t that just a way of saying that no one is responsible for it. To which, Pandit replies in a classic bit of understatement that maybe markets went a little further than they should have.
Pandit also thinks the government is doing a good job with the markets, and why not? I would think the government was doing a frigging great job too if it had just guaranteed $306 billion of my crap assets. Oh and Citigroup? He thinks that they have a great management team and they are looking to the future. And the past? Well, he thinks that the repeal of Glass-Steagall was a good thing because it allowed Winfried Bischoff to build such a wonderful company. How Pandit squares this with the $306 plus $20 billion federal bailout he just got, well, the short answer is he doesn’t. Rubin gets a mention as a strong presence, good with clients, but in an attempt to insulate him somewhat Pandit says he was not in on key decisions.
As for the big picture, Pandit says the world’s financial markets need uniform regulation and requirements, this sounds good but if you take a quick look at the world’s countries, economies, and banking systems, it is definitely not a one size fits all kind of place. But Pandit says what the world financial system really needs is transparency. And even though he has just concluded a massive, behind the scenes, weekend deal that papers over the problems at Citi and the banking system at large, he says it without any sense of irony.
As I said at the start, it is important to listen to people like Vikram Pandit because although they may not realize it they will tell you exactly how we got into the current mess and also how unlikely it will be, with them in charge, to get out of it anytime soon.
9 Comments
Thanks very much Hugh.
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I recommend this “harsh” post. Bandit is a rock and roll legend, similar to say Milli Vanilli. David Neubert, another rich guy who even blogs at HuffPo, should know. Because Neubert dreamed up lots of crazy derivatives.
Neubert also says: “I found the Citibank Live Richly campaign fantastic.” So from
BPandit, I link to Neubert, then link to “Live Richly” which gets me to, Jim Hightower.Thank you very much for this!
i didn’t watch but i listened to the interview. in the beginning rose mentioned that it was pandit’s first television interview – that may have accounted for the fear i heard in his voice, or it maybe that he some clue about how completely in over his head he is.
this perfectly sums up my take as well. for example, there’s a bit where pandit is “explaining” to rose what’s going on. point two he say is:
of course. now i understand. the bankers woke up one morning and found a bunch of securities had magically appeared on their balance sheets. no one knows how they got there, but apparently it’s a problem. and silly me, i thought deleveraging had something to do with paying down debt.
the more i listened, the more confusing it all sounded. and i think that’s the goal – to make it incomprehensible so we won’t look too closely and will instead put our trust in the experts. except these are the people who got us into this mess and it’s pretty clear they have no idea what to do about it – other than milk it for all they can on the way down.
Thank you for your incisive analysis. Here’s what I saw.
Pandit appeared prepared for CNN, MSNBC or the network news. He had his goal and his talking points. Goal: confidence. Talking points: this is not about Citi, this was never about Citi, it’s just this little problem we’re having with the banking system right now.
Pandit stuck to his talking points and his goal. But he wasn’t on CNN, MSNBC or the network news. As he blathered benignly on, he appeared increasingly smarmy & irrelevant. He never directly answered any question and his patronizing repetition of the name “Charlie” invited recollections of Sarah Palin.
I gained respect for good ole Charlie Rose. I’d never seen the lawyer in Rose before. But utilizing his disarming manner, (in my view) he was having none of it. He circled Pandit like a tiger, calmly repeating each question Pandit hadn’t answered but adding, each time, more facts from Sunday’s Dash/Creswell article or from other accepted sources. Every time Pandit ‘Charlie’d’ him without answering the question, Pandit appeared unmasked.
By the end of the interview Pandit looked like a silly, lying, condescending, fool. An utter fool. I believe he fooled no one — and that he had fully intended to fool everyone. I give Charlie Rose credit for that.
Then I read Thomas Friedman in today’s Times. http://www.nytimes.com/2008/11…..038;st=cse
“Citigroup was involved in, and made money from, almost every link in that chain. And the bank’s executives, including, sad to see, the former Treasury Secretary Robert Rubin, were clueless about the reckless financial instruments they were creating, or were so ensnared by the cronyism between the bank’s risk managers and risk takers (and so bought off by their bonuses) that they had no interest in stopping it.”
Good job, Charlie Rose. Bad move, Vikram Pandit.
Nicely done Hugh. I saw the interview last night and had a really hard time controlling my gag reflex. Pandit is a deceitful liar to suggest that no one could have known what a disaster this would become. I am so pissed off about this whole bailout. What a con on all of us. Another transfer of wealth to the rich and powerful while they spit on the rest of us.
Thank you, Hugh. I saw the program and agree with your fine analysis. All the talkers are repeating, repeating, repeating “confindence” – - and Citigroup sends a confidence man to convince us?? No thanks.
Excellent article Hugh!
These lying bastards are trying to save their creepy business model and are trying to convince the congress – and have largely succeeded that – the system must be saved.
Oh really?
Sure we need to have banks which lend money to consumers and business for development, but we don’t need the type of banks and financial firms with their wealth creation models for the upper tier that these slackers say we must save.
What we should do is bust up these huge bank conglomerates and not allow to operate in more than a handful of contiguous states. Make them small regional banks. When large financing is required the loans can be joint ventures of several smaller banks.
End the CDS, CDO derivatives and other “bundled securities”. Along with this would be the end of the bond rating agencies. All loans need to be secured with real appraised collateral.
Close the stock markets to trading of shares. This is nothing more than speculation and has nothing to do with raising capital for a corporation.
Get these lying non productive slacker money lenders out of the key position in the economy. We need to value work, not manipulating “other’s” money for profit.
These are radical ideas and go against the idea of “wealth as god” in America. The deal here is that – you win if you are rich – that’s what counts in the USA and the world for that matter. How you get your wealth hardly matters. Without it, you are a nobody.
Ain’t that lovely?
Sounds good, SanderO. All the $Billions injected into the Big Banks doesn’t seem to have made a whit of difference. The CEO’s in the ivory towers know they are all liars so trust nobody and hoard what they’ve stolen. Paulson doesn’t seem to address the fact that the banks are not living up to their part of the bargain. (since it was not mandated by legislation).
Just wonderin’ where the Bush fortunes are stored. . . and Paulson’s ….and Cheney’s. Anybody got a clue?