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Jan 04

Weill: Citi’s managers were at fault, not the business model

Posted by MQuinn in managementCitigroupbusiness models


The New York Times has a lengthy profile of former Citigroup chairman and CEO, Sandy Weill. 

One of the more interesting points is his clearly soured relationship with his former co-CEO at Citi, John Reed. Reed was running Citicorp when it merged with Weill's Travelers Group in 1998, forming Citigroup. Of course, that merger helped pave the way for the repeal of the Glass-Steagall Act in 1999, a law that prevented companies engaged in traditional banking activities from also participating in the capital markets. Many critics now point to that moment as one that helped create the recent financial crisis.

Reed, who recently said he was "sorry" for what has happened to Citi, says the law should never have been repealed.

Weill, on the other hand, says he is "sad" about Citi's current state of affairs. But judging by the fact that a hunk of wood - at least 4 feet wide - etched with his portrait and the words "The Shatterer of Glass-Steagall" still hangs on his office wall, Weill doesn't quite feel the same remorse.

Indeed, Weill told the Times in regard to Reed's new stance on Glass-Steagall, "I don't agree at all." Such differences, he says, were "part of our problem."

And he's right. There seems to have been a truly divisive culture within Citi. But Weill remains in denial about it being due to too many disparate operations. He insists the model was a good one. It was the managers who were lacking.

"Judah Kraushaar, a hedge fund manager and former banking analyst who worked with Mr. Weill on his autobiography, said that Citi's problem wasn't that it was unmanageable, but that it lacked enough good managers - and that Mr. Weill was a good manager."

But that begs the question: If you have a great business model but not the managers to execute it, do you really have a great business model?

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