Citigroup

Citigroup

Overview


Citigroup Inc. or Citi is an American multinational
Multinational corporation
A multi national corporation or enterprise , is a corporation or an enterprise that manages production or delivers services in more than one country. It can also be referred to as an international corporation...

 financial services
Financial services
Financial services refer to services provided by the finance industry. The finance industry encompasses a broad range of organizations that deal with the management of money. Among these organizations are credit unions, banks, credit card companies, insurance companies, consumer finance companies,...

 corporation headquartered in Manhattan
Manhattan
Manhattan is the oldest and the most densely populated of the five boroughs of New York City. Located primarily on the island of Manhattan at the mouth of the Hudson River, the boundaries of the borough are identical to those of New York County, an original county of the state of New York...

, New York City, New York, United States. Citigroup was formed from one of the world's largest mergers in history by combining the banking giant Citicorp and financial conglomerate Travelers Group on April 7, 1998.

Citigroup Inc. has the world's largest financial services network, spanning 140 countries with approximately 16,000 offices worldwide.
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Citigroup Inc. or Citi is an American multinational
Multinational corporation
A multi national corporation or enterprise , is a corporation or an enterprise that manages production or delivers services in more than one country. It can also be referred to as an international corporation...

 financial services
Financial services
Financial services refer to services provided by the finance industry. The finance industry encompasses a broad range of organizations that deal with the management of money. Among these organizations are credit unions, banks, credit card companies, insurance companies, consumer finance companies,...

 corporation headquartered in Manhattan
Manhattan
Manhattan is the oldest and the most densely populated of the five boroughs of New York City. Located primarily on the island of Manhattan at the mouth of the Hudson River, the boundaries of the borough are identical to those of New York County, an original county of the state of New York...

, New York City, New York, United States. Citigroup was formed from one of the world's largest mergers in history by combining the banking giant Citicorp and financial conglomerate Travelers Group on April 7, 1998.

Citigroup Inc. has the world's largest financial services network, spanning 140 countries with approximately 16,000 offices worldwide. The company currently employs approximately 260,000 staff around the world, which is down from 267,150 in 2010 according to Forbes. It also holds over 200 million customer accounts in more than 140 countries. It is a primary dealer
Primary dealers
Primary dealer is a formal designation of a firm as a market maker of government securities. Primary dealer systems are present in many countries including Canada, France, Italy, Spain, the United Kingdom, and the United States...

 in US Treasury securities. According to Forbes, at its height Citigroup used to be the largest company and bank in the world by total assets with 357,000 employees until the global financial crisis of 2008. Today it is ranked 10th in size by composite index. In comparison, JPMorgan Chase now ranks as the largest company and bank in the world as of 2011.

Citigroup suffered huge losses during the global financial crisis of 2008 and was rescued in November 2008 in a massive stimulus package by the U.S. government.
Its largest shareholders include funds from the Middle East and Singapore
Singapore
Singapore , officially the Republic of Singapore, is a Southeast Asian city-state off the southern tip of the Malay Peninsula, north of the equator. An island country made up of 63 islands, it is separated from Malaysia by the Straits of Johor to its north and from Indonesia's Riau Islands by the...

. According to the NYTimes, on February 23, 2009, Citigroup announced that the United States government would take a 36% equity
Stock
The capital stock of a business entity represents the original capital paid into or invested in the business by its founders. It serves as a security for the creditors of a business since it cannot be withdrawn to the detriment of the creditors...

 stake in the company by converting $25 billion in emergency aid into common shares with a US Treasury credit line of $45 billion to prevent the bankruptcy of the largest bank in the world at the time. The government would also guarantee losses on more than $300 billion troubled assets and inject $20 billion immediately into the company. In exchange, the salary of the CEO is $1 per year and the highest salary of employees is restricted to $500,000 in cash and any amount above $500,000 must be paid with restricted stock that cannot be sold until the emergency government aid is repaid in full. The US government also gains control of half the seats in the Board of Directors, and the senior management is subjected to removal by the US government if there is poor performance. By December 2009, the US government stake was reduced to 27% majority stake from a 36% majority stake after Citigroup sold $21 billion of common shares and equity in the largest single share sale in US history, surpassing Bank of America's $19 billion share sale one month prior. Eventually by December 2010, Citigroup repaid the emergency aid in full and the US government received an additional $12 billion profit in selling its shares. US Government restrictions on pay and oversight of the senior management are removed after the US government sold its remaining 27% stake as of December 2010. According to the WSJ, the government aid was provided to prevent a world-wide chaos and panic by the potential collapse of its Global Transactions Services division, which transports more than $3 trillion around the world each day for most of the Fortune 500 companies and over 80 national governments and 60 central banks around the world. According to the article, Mr. Pandit said if Citigroup was allowed to unravel into bankruptcy, "100 governments around the world would be trying to figure out how to pay their employees."

Despite huge losses during the global financial crisis, Citigroup Inc. built up an enormous cash pile in the wake of the financial crisis with $462 billion USD, which is slightly more than Sweden's nominal GDP of $458 billion USD. Citi currently has Tier 1 Common ratio of 11.6% and a Tier 1 Capital ratio of 13.6% as of the end of the second quarter, making it ironically one of the best-capitalized financial institutions in the world after billions of dollars in losses from the financial crisis. This was a result of selling more than $500 billion of its special assets placed in Citi Holdings, which were guaranteed from losses by the US Treasury while under federal majority ownership. Additionally, according to the Washington Post a special IRS tax exception given to Citi to allow the US Treasury to sell its shares at a profit while it still owned Citigroup shares, which eventually net $12 billion dollars. According to Treasury spokeswoman Nayyera Haq, "This (IRS tax) rule was designed to stop corporate raiders from using loss corporations to evade taxes, and was never intended to address the unprecedented situation where the government owned shares in banks. And it was certainly not written to prevent the government from selling its shares for a profit."

Citigroup is one of the Big Four banks in the United States, along with Bank of America
Bank of America
Bank of America Corporation, an American multinational banking and financial services corporation, is the second largest bank holding company in the United States by assets, and the fourth largest bank in the U.S. by market capitalization. The bank is headquartered in Charlotte, North Carolina...

, JP Morgan Chase and Wells Fargo
Wells Fargo
Wells Fargo & Company is an American multinational diversified financial services company with operations around the world. Wells Fargo is the fourth largest bank in the U.S. by assets and the largest bank by market capitalization. Wells Fargo is the second largest bank in deposits, home...

.

History


Citigroup was formed on October 9, 1998, following the $140 billion merger of Citicorp and Travelers Group to create the world's largest financial services organization. The history of the company is, thus, divided into the workings of several firms that over time amalgamated into Citicorp, a multinational banking corporation operating in more than 100 countries; or Travelers Group, whose businesses covered credit services, consumer finance, brokerage, and insurance. As such, the company history dates back to the founding of: the City Bank of New York (later Citibank
Citibank
Citibank, a major international bank, is the consumer banking arm of financial services giant Citigroup. Citibank was founded in 1812 as the City Bank of New York, later First National City Bank of New York...

) in 1812; Bank Handlowy in 1870; Smith Barney
Smith Barney
Morgan Stanley Smith Barney is a retail brokerage joint venture between Morgan Stanley and Citigroup.On January 13, 2009, Morgan Stanley and Citigroup announced that Citigroup would sell 51% of Smith Barney to Morgan Stanley, creating Morgan Stanley Smith Barney, which was formerly a division of...

 in 1873, Banamex in 1884; Salomon Brothers
Salomon Brothers
Salomon Brothers was a bulge bracket, Wall Street investment bank. Founded in 1910 by three brothers along with a clerk named Ben Levy, it remained a partnership until the early 1980s, when it was acquired by the commodity trading firm Phibro Corporation and then became Salomon Inc. Eventually...

 in 1910.

Citicorp


The history begins with the City Bank of New York, which was chartered by New York State on June 16, 1812, with $2 million of capital. Serving a group of New York merchant
Merchant
A merchant is a businessperson who trades in commodities that were produced by others, in order to earn a profit.Merchants can be one of two types:# A wholesale merchant operates in the chain between producer and retail merchant...

s, the bank opened for business on September 14 of that year, and Samuel Osgood was elected as the first President of the company. The company's name was changed to The National City Bank of New York in 1865 after it joined the new U.S. national banking system, and it became the largest American bank by 1895. It became the first contributor to the Federal Reserve Bank of New York
Federal Reserve Bank of New York
The Federal Reserve Bank of New York is one of the 12 Federal Reserve Banks of the United States. It is located at 33 Liberty Street, New York, NY. It is responsible for the Second District of the Federal Reserve System, which encompasses New York state, the 12 northern counties of New Jersey,...

 in 1913, and the following year it inaugurated the first overseas branch of a U.S. bank in Buenos Aires
Buenos Aires
Buenos Aires is the capital and largest city of Argentina, and the second-largest metropolitan area in South America, after São Paulo. It is located on the western shore of the estuary of the Río de la Plata, on the southeastern coast of the South American continent...

, although the bank had, since the mid-nineteenth century, been active in plantation economies, such as the Cuban sugar industry. The 1918 purchase of U.S. overseas bank International Banking Corporation helped it become the first American bank to surpass $1 billion in assets, and it became the largest commercial bank in the world in 1929. As it grew, the bank became a leading innovator in financial services, becoming the first major U.S. bank to offer compound interest
Compound interest
Compound interest arises when interest is added to the principal, so that from that moment on, the interest that has been added also itself earns interest. This addition of interest to the principal is called compounding...

 on savings (1921); unsecured personal loans (1928); customer checking accounts
Cheque
A cheque is a document/instrument See the negotiable cow—itself a fictional story—for discussions of cheques written on unusual surfaces. that orders a payment of money from a bank account...

 (1936) and the negotiable certificate of deposit
Certificate of deposit
A certificate of Deposit is a time deposit, a financial product commonly offered to consumers in the United States by banks, thrift institutions, and credit unions....

 (1961).

The bank changed its name to The First National City Bank of New York in 1955, which was shortened in 1962 to First National City Bank on the 150th anniversary of the company's foundation. The company organically entered the leasing and credit card sectors, and its introduction of US$ certificates of deposit in London marked the first new negotiable instrument in market since 1888. Later to become MasterCard
MasterCard
Mastercard Incorporated or MasterCard Worldwide is an American multinational financial services corporation with its headquarters in the MasterCard International Global Headquarters, Purchase, Harrison, New York, United States...

, the bank introduced its First National City Charge Service credit card
Credit card
A credit card is a small plastic card issued to users as a system of payment. It allows its holder to buy goods and services based on the holder's promise to pay for these goods and services...

 – popularly known as the "Everything card" – in 1967.

In 1976, under the leadership of CEO Walter B. Wriston, First National City Bank (and its holding company First National City Corporation) was renamed as Citibank, N.A. (and Citicorp, respectively). Shortly afterward, the bank launched the Citicard, which pioneered the use of 24-hour ATM
Automated teller machine
An automated teller machine or automatic teller machine, also known as a Cashpoint , cash machine or sometimes a hole in the wall in British English, is a computerised telecommunications device that provides the clients of a financial institution with access to financial transactions in a public...

s. John S. Reed
John S. Reed
John Shepard Reed is the former Chairman of the New York Stock Exchange. He previously served as Chairman and CEO of Citicorp, Citibank, and post-merger, Citigroup. He is currently the Chairman of the Massachusetts Institute of Technology's Office of Corporation. He was born in Chicago, Illinois,...

 was elected CEO in 1984, and Citi became a founding member of the CHAPS
CHAPS
The Clearing House Automated Payment System or CHAPS is a British company established in London in 1984, which offers same-day sterling fund transfers...

 clearing house in London. Under his leadership, the next 14 years would see Citibank become the largest bank in the United States, the largest issuer of credit cards and charge cards in the world, and expand its global reach to over 90 countries.

Travelers Group


Travelers Group, at the time of merger, was a diverse group of financial concerns that had been brought together under CEO Sandy Weill. Its roots came from Commercial Credit, a subsidiary of Control Data Corporation
Control Data Corporation
Control Data Corporation was a supercomputer firm. For most of the 1960s, it built the fastest computers in the world by far, only losing that crown in the 1970s after Seymour Cray left the company to found Cray Research, Inc....

 that was taken private by Weill in November 1986 after taking charge of the company earlier that year. Two years later, Weill mastered the buyout of Primerica
Primerica Financial Services
Primerica, Inc. is a referral marketer of financial products and services using a hybrid model of direct selling, franchising and distribution....

 – a conglomerate that had already bought life insurer
Life insurance
Life insurance is a contract between an insurance policy holder and an insurer, where the insurer promises to pay a designated beneficiary a sum of money upon the death of the insured person. Depending on the contract, other events such as terminal illness or critical illness may also trigger...

 A L Williams as well as stock broker
Stock broker
A stock broker or stockbroker is a regulated professional broker who buys and sells shares and other securities through market makers or Agency Only Firms on behalf of investors...

 Smith Barney
Smith Barney
Morgan Stanley Smith Barney is a retail brokerage joint venture between Morgan Stanley and Citigroup.On January 13, 2009, Morgan Stanley and Citigroup announced that Citigroup would sell 51% of Smith Barney to Morgan Stanley, creating Morgan Stanley Smith Barney, which was formerly a division of...

. The new company took the Primerica name, and employed a "cross-selling
Cross-selling
Cross-selling is the action or practice of selling among or between established clients, markets, traders, etc. or the action or practice of selling an additional product or service to an existing customer. This article deals exclusively with the latter meaning. In practice, businesses define...

" strategy such that each of the entities within the parent company aimed to sell each other's services. Its non-financial businesses were spun-off
Spin out
A spin-out, also known as a spin-off or a starburst, refers to a type of corporate action where a company "splits off" sections of itself as a separate business....

.
In September 1992, Travelers Insurance, which had suffered from poor real estate investments and sustained significant losses in the aftermath of Hurricane Andrew
Hurricane Andrew
Hurricane Andrew was the third Category 5 hurricane to make landfall in the United States, after the Labor Day Hurricane of 1935 and Hurricane Camille in 1969. Andrew was the first named storm and only major hurricane of the otherwise inactive 1992 Atlantic hurricane season...

, formed a strategic alliance with Primerica that would lead to its amalgamation into a single company in December 1993. With the acquisition, the group became Travelers Inc. Property & casualty and life & annuities underwriting
Underwriting
Underwriting refers to the process that a large financial service provider uses to assess the eligibility of a customer to receive their products . The name derives from the Lloyd's of London insurance market...

 capabilities were added to the business. Meanwhile, the distinctive Travelers red umbrella logo, which was also acquired in the deal, was applied to all the businesses within the newly named organization. During this period, Travelers acquired Shearson Lehman – a retail brokerage and asset management firm that was headed by Weill until 1985 – and merged it with Smith Barney.

Salomon Brothers


Finally, in November 1997, Travelers Group (which had been renamed again in April 1995 when they merged with Aetna Property and Casualty, Inc.), made the $9 billion deal to purchase Salomon Brothers
Salomon Brothers
Salomon Brothers was a bulge bracket, Wall Street investment bank. Founded in 1910 by three brothers along with a clerk named Ben Levy, it remained a partnership until the early 1980s, when it was acquired by the commodity trading firm Phibro Corporation and then became Salomon Inc. Eventually...

, a major bond dealer
Bond market
The bond market is a financial market where participants can issue new debt, known as the primary market, or buy and sell debt securities, known as the Secondary market, usually in the form of bonds. The primary goal of the bond market is to provide a mechanism for long term funding of public and...

 and bulge bracket
Bulge bracket
The bulge bracket comprises the "big banks," the world's largest and most profitable multi-national investment banks.- Technical meaning :The term 'bulge bracket' refers to the first group of investment banks listed on the "tombstone" notifying the public of a financial transaction or deal...

 investment bank. This deal complemented Travelers/Smith Barney
Smith Barney
Morgan Stanley Smith Barney is a retail brokerage joint venture between Morgan Stanley and Citigroup.On January 13, 2009, Morgan Stanley and Citigroup announced that Citigroup would sell 51% of Smith Barney to Morgan Stanley, creating Morgan Stanley Smith Barney, which was formerly a division of...

 well as Salomon was focused on fixed-income and institutional clients whereas Smith Barney was strong in equities and retail. Salomon Brothers absorbed Smith Barney into the new securities unit termed Salomon Smith Barney; a year later, the division incorporated Citicorp's former securities operations as well. The Salomon Smith Barney name was ultimately abandoned in October 2003 after a series of financial scandals
Global settlement
The Global Settlement was an enforcement agreement reached on April 28, 2003 between the SEC, NASD, NYSE, and ten of the United States's largest investment firms to address issues of conflict of interest within their businesses-Settlement Decision:...

 that tarnished the bank's reputation.

Citicorp and Travelers merger


On April 6, 1998, the merger between Citicorp and Travelers Group was announced to the world, creating a $140 billion firm with assets of almost $700 billion. The deal would enable Travelers to market mutual funds and insurance to Citicorp's retail customers while giving the banking divisions access to an expanded client base of investors and insurance buyers.

Although presented as a merger, the deal was actually more like a stock swap, with Travelers Group purchasing the entirety of Citicorp shares for $70 billion, and issuing 2.5 new Citigroup shares for each Citicorp share. Through this mechanism, existing shareholders of each company owned about half of the new firm. While the new company maintained Citicorp's "Citi" brand in its name, it adopted Travelers' distinctive "red umbrella" as the new corporate logo, which was used until 2007.

The chairmen of both parent companies, John Reed
John S. Reed
John Shepard Reed is the former Chairman of the New York Stock Exchange. He previously served as Chairman and CEO of Citicorp, Citibank, and post-merger, Citigroup. He is currently the Chairman of the Massachusetts Institute of Technology's Office of Corporation. He was born in Chicago, Illinois,...

 and Sandy Weill respectively, were announced as co-chairmen and co-CEOs of the new company, Citigroup, Inc., although the vast difference in management styles between the two immediately presented question marks over the wisdom of such a setup.

The remaining provisions of the Glass–Steagall Act – enacted following the Great Depression – forbade banks to merge with insurance underwriters, and meant Citigroup had between two and five years to divest any prohibited assets. However, Weill stated at the time of the merger that they believed "that over that time the legislation will change...we have had enough discussions to believe this will not be a problem". Indeed, the passing of the Gramm-Leach-Bliley Act
Gramm-Leach-Bliley Act
The Gramm–Leach–Bliley Act , also known as the Financial Services Modernization Act of 1999, is an act of the 106th United States Congress...

 in November 1999 vindicated Reed and Weill's views, opening the door to financial services conglomerates offering a mix of commercial banking, investment banking, insurance underwriting and brokerage.

Joe Plumeri headed the integration of the consumer businesses of Travelers Group and Citicorp after the merger, and was appointed CEO of Citibank North America by Weill and Reed. He oversaw its network of 450 retail
Retail banking
Retail banking is banking in which banking institutions execute transactions directly with consumers, rather than corporations or other banks. Services offered include: savings and transactional accounts, mortgages, personal loans, debit cards, credit cards, and so forth.-Types of...

 branches. J. Paul Newsome, an analyst with CIBC Oppenheimer, said: "He's not the spit-and-polish executive many people expected. He's rough on the edges. But Citibank knows the bank as an institution is in trouble-it can't get away anymore with passive selling-and Plumeri has all the passion to throw a glass of cold water on the bank." It was conjectured that he might become a leading contender to run all of Citigroup when Weill and Reed stepped down, if he were to effect a big, noticeable victory at Citibank. In that position, Plumeri boosted the unit's earnings from $108 million to $415 million in one year, an increase of nearly 400%. He unexpectedly retired from Citibank, however, in January 2000.

In 2000, Citigroup acquired Associates First Capital Corporation, which, until 1989, had been owned by Gulf+Western
Gulf+Western
Gulf and Western Industries, Inc., for a number of years known as Gulf+Western, was an American conglomerate.- History :Gulf and Western's prosaic origins date to a manufacturer named Michigan Bumper Co. founded in 1934, though Charles Bluhdorn treated his 1958 takeover of what was then Michigan...

 (now part of National Amusements
National Amusements
National Amusements, Inc. is a privately owned theatre company based in Dedham, Massachusetts, USA. The company was founded in 1936 as the Northeast Theatre Corporation by Michael Redstone....

). The Associates was widely criticized for predatory lending practices and Citi eventually settled with the Federal Trade Commission by agreeing to pay $240 million to customers who had been victims of a variety of predatory practices, including "flipping" mortgages, "packing" mortgages with optional credit insurance, and deceptive marketing practices.

In 2001, Citigroup made additional acquisitions: European American Bank, in July, for $1.9 billion, and Banamex in August, for $12.5 billion.

Travelers spin off



The company spun off its Travelers Property and Casualty insurance underwriting business in 2002. The spin off was prompted by the insurance unit's drag on Citigroup stock price because Traveler's earnings were more seasonal and vulnerable to large disasters, particularly the September 11, 2001 attacks on the World Trade Center
World Trade Center
The original World Trade Center was a complex with seven buildings featuring landmark twin towers in Lower Manhattan, New York City, United States. The complex opened on April 4, 1973, and was destroyed in 2001 during the September 11 attacks. The site is currently being rebuilt with five new...

 in downtown New York City. It was also difficult to sell this kind of insurance directly to customers since most industrial customers are accustomed to purchasing insurance through a broker.

The Travelers Property Casualty Corporation merged with The St. Paul Companies Inc. in 2004 forming The St. Paul Travelers Companies. Citigroup retained the life insurance and annuities underwriting business; however, it sold those businesses to MetLife in 2005. Citigroup still heavily sells all forms of insurance, but it no longer underwrites insurance.

In spite of their divesting Travelers Insurance, Citigroup retained Travelers' signature red umbrella logo as its own until February 2007, when Citigroup agreed to sell the logo back to St. Paul Travelers, which renamed itself Travelers Companies. Citigroup also decided to adopt the corporate brand "Citi" for itself and virtually all its subsidiaries, except Primerica and Banamex.

Subprime mortgage crisis


Heavy exposure to troubled mortgages in the form of Collateralized debt obligation
Collateralized debt obligation
Collateralized debt obligations are a type of structured asset-backed security with multiple "tranches" that are issued by special purpose entities and collateralized by debt obligations including bonds and loans. Each tranche offers a varying degree of risk and return so as to meet investor demand...

 (CDOs), compounded by poor risk management led Citigroup into trouble as the subprime mortgage crisis
Subprime mortgage crisis
The U.S. subprime mortgage crisis was one of the first indicators of the late-2000s financial crisis, characterized by a rise in subprime mortgage delinquencies and foreclosures, and the resulting decline of securities backed by said mortgages....

 worsened in 2008. The company had used elaborate mathematical risk models which looked at mortgages in particular geographical areas, but never included the possibility of a national housing downturn, or the prospect that millions of mortgage holders would default on their mortgages. Indeed, trading head Thomas Maheras
Thomas Maheras
Thomas G. Maheras is a managing partner of Tegean Capital Management, LLC, a New York-based investment advisory firm founded in 2008.Previously, Mr. Maheras was Chairman and Co-Chief Executive Officer of Citi Markets and Banking , the investment banking division of Citigroup Inc. Prior to that,...

 was close friends with senior risk officer David Bushnell, which undermined risk oversight. As Treasury Secretary, Robert Rubin
Robert Rubin
Robert Edward Rubin served as the 70th United States Secretary of the Treasury during both the first and second Clinton administrations. Before his government service, he spent 26 years at Goldman Sachs eventually serving as a member of the Board, and Co-Chairman from 1990-1992...

 was said to be influential in lifting the regulations that allowed Travelers and Citicorp to merge in 1998. Then on the board of directors of Citigroup, Rubin and Charles Prince were said to be influential in pushing the company towards MBS and CDOs in the subprime mortgage market.

As the crisis began to unfold, Citigroup announced on April 11, 2007, that it would eliminate 17,000 jobs, or about 5 percent of its workforce, in a broad restructuring designed to cut costs and bolster its long underperforming stock. Even after securities
Security (finance)
A security is generally a fungible, negotiable financial instrument representing financial value. Securities are broadly categorized into:* debt securities ,* equity securities, e.g., common stocks; and,...

 and brokerage firm Bear Stearns
Bear Stearns
The Bear Stearns Companies, Inc. based in New York City, was a global investment bank and securities trading and brokerage, until its sale to JPMorgan Chase in 2008 during the global financial crisis and recession...

 ran into serious trouble in summer 2007, Citigroup decided the possibility of trouble with its CDO's was so tiny (less than 1/100 of 1%) that they excluded them from their risk analysis. With the crisis worsening, Citigroup announced on January 7, 2008 that it was considering cutting another 5 percent to 10 percent of its work force, which totaled 327,000.

Federal assistance


Over the past several decades, the United States government has engineered at least four different rescues of the institution now known as Citigroup. During the most recent tax-payer funded rescue, by November 2008, Citigroup was insolvent, despite its receipt of $25 billion in federal TARP
Troubled Assets Relief Program
The Troubled Asset Relief Program is a program of the United States government to purchase assets and equity from financial institutions to strengthen its financial sector that was signed into law by U.S. President George W. Bush on October 3, 2008...

 funds, and on November 17, 2008, Citigroup announced plans for about 52,000 new job cuts, on top of 23,000 cuts already made during 2008 in a huge job cull resulting from four quarters of consecutive losses and reports that it was unlikely to be in profit again before 2010. On the same day, Wall Street
Wall Street
Wall Street refers to the financial district of New York City, named after and centered on the eight-block-long street running from Broadway to South Street on the East River in Lower Manhattan. Over time, the term has become a metonym for the financial markets of the United States as a whole, or...

 responded by dropping its stock market value to $6 billion, down from $300 billion two years prior. As a result, Citigroup and Federal regulators negotiated a plan to stabilize the company and forestall a further deterioration in the company's value. The arrangement calls for the government to back about $306 billion in loans and securities and directly invest about $20 billion in the company. The assets remain on Citigroup's balance sheet; the technical term for this arrangement is ring fencing. In a New York Times op-ed, Michael Lewis and David Einhorn described the $306 billion guarantee as "an undisguised gift" without any real crisis motivating it. The plan was approved late in the evening on November 23, 2008. A joint statement by the US Treasury Department, the Federal Reserve and the Federal Deposit Insurance Corp announced: "With these transactions, the U.S. government is taking the actions necessary to strengthen the financial system and protect U.S. taxpayers and the U.S. economy."

Citigroup in late 2008 held $20 billion of mortgage-linked securities, most of which have been marked down to between 21 cents and 41 cents on the dollar, and has billions of dollars of buyout and corporate loans. It faces potential massive losses on auto, mortgage and credit card loans if the economy worsens. [This paragraph requires a reference, particularly to the $20 billion figure quoted above. It is likely that this number is a severe underestimate of the value of CDO holdings held in off-balance sheet SIVs.]

On January 16, 2009, Citigroup announced its intention to reorganize itself into two operating units: Citicorp for its retail and institutional client business, and Citi Holdings for its brokerage and asset management. Citigroup will continue to operate as a single company for the time being, but Citi Holdings managers will be tasked to "tak[e] advantage of value-enhancing disposition and combination opportunities as they emerge", and eventual spin-offs or mergers involving either operating unit have not been ruled out. On February 27, 2009 Citigroup announced that the United States government would be taking a 36% equity
Stock
The capital stock of a business entity represents the original capital paid into or invested in the business by its founders. It serves as a security for the creditors of a business since it cannot be withdrawn to the detriment of the creditors...

 stake in the company by converting $25 billion in emergency aid into common shares. Citigroup shares dropped 40% on the news.

On June 1, 2009, it was announced that Citigroup Inc. would be removed from the Dow Jones Industrial Average
Dow Jones Industrial Average
The Dow Jones Industrial Average , also called the Industrial Average, the Dow Jones, the Dow 30, or simply the Dow, is a stock market index, and one of several indices created by Wall Street Journal editor and Dow Jones & Company co-founder Charles Dow...

 effective June 8, 2009, due to significant government ownership. Citigroup Inc. was replaced by Travelers Co.

Return to profitability, non-governmental shareholder ownership


In 2010, Citigroup achieved its first profitable year since 2007. It reported $10.6 billion in net profit, compared with a $1.6 billion loss in 2009. Late in 2010, the government sold its remaining stock holding in the company, yielding an overall net profit to taxpayers of $12 billion.

Regional Consumer Banking


Retail Banking, Local Commercial Banking and Citi Personal Wealth Management
  • North America, EMEA, Latin America and Asia; Residential real estate in North America


Citi-Branded Cards
  • North America, EMEA, Latin America and Asia


Retail partner cards
  • North America, EMEA, Latin America and Asia


Latin America Asset Management

Institutional Clients Group


Securities and Banking
  • Investment banking
  • Debt and equity markets (including prime brokerage)
  • Lending
  • Private equity
  • Hedge funds
  • Real estate
  • Structured products
  • Private Bank
  • Equity and Fixed Income research


Transaction Services
  • Cash management
  • Trade services
  • Custody and fund services
  • Clearing services
  • Agency/trust

Brokerage and Asset Management

  • Largely includes investment in and associated earnings from Morgan Stanley Smith Barney joint venture
  • Retail alternative investments

Local Consumer Lending


North America
  • Consumer finance lending: residential and commercial real estate; auto, student and personal loans; and consumer branch lending
  • Certain international consumer lending (including Western Europe retail banking and cards)

Divisions



Citi is organized into two major segments – Citicorp and Citi Holdings. Citicorp contains Regional Consumer Banking and Institutional Clients Group. Citi Holdings contains Citi's Brokerage and Asset Management, Local Consumer Lending, and Special Asset Pool.

Regional Consumer Banking


This division of Citigroup generated 12 billion in revenue and more than $4 billion in net income in 2006, Global Consumer Group, which is now known as Regional Consumer Banking, comprises four sub-divisions: Cards (credit card
Credit card
A credit card is a small plastic card issued to users as a system of payment. It allows its holder to buy goods and services based on the holder's promise to pay for these goods and services...

s), Consumer Lending Group (Real-Estate Lending, Auto Loans, Student Loans), Consumer Finance
Consumer finance
Alternative financial services in the United States refers to a particular type of financial service, namely sub-prime lending by non-bank financial institutions. This branch of the financial services industry is more extensive in the United States than in some other countries, because the major...

, and Retail Banking
Retail banking
Retail banking is banking in which banking institutions execute transactions directly with consumers, rather than corporations or other banks. Services offered include: savings and transactional accounts, mortgages, personal loans, debit cards, credit cards, and so forth.-Types of...

. Targeting individual consumers as well as small- to medium-sized businesses, it offers financial services across its worldwide branch network, including banking, loans, insurance, and investment services. On March 31, 2008, Citigroup announced that it will create 2 new global businesses – Consumer Banking and Global Cards out of the existing Global Consumer Group. This has since changed. Consumer Banking "The Americas" is managed by Manuel Medina Mora who was the CEO of Banamex prior to its merger with Citigroup. Western Europe, Central Europe and Asia are under Business Managers responsible for both the Consumer and Corporate/Investment businesses. After 2008, Citigroup carved out Citi Holdings as a separate entity to manage the businesses on the block.
Citigroup Nominates 4 Independent Directors by New York Times (March 16, 2009)

Citi Cards


Citi Cards is responsible for around 40% of the profits with GCG, and represents the largest issuer of credit cards across the world as well as a 3,800-point ATM
Automated teller machine
An automated teller machine or automatic teller machine, also known as a Cashpoint , cash machine or sometimes a hole in the wall in British English, is a computerised telecommunications device that provides the clients of a financial institution with access to financial transactions in a public...

 network across 45 countries.

Consumer Finance division (branded as "CitiFinancial") accounts for about 20% of GCG's profits, and offers personal loans and homeowner loans to consumers in 20 countries worldwide. There are over 2,100 branches in the U.S. and Canada. The takeover of Associates First Capital in September 2000 enabled CitiFinancial to expand its reach outside of the United States, particularly capitalizing on Associates' 700,000 customers in Japan and Europe.[28] Citi ended its CitiFinancial operations in the UK in 2008. Citifinancial is head by Mary Mcdowell in Baltimore, Maryland. On December 8, 2010, CitiGroup announced a rebranding name change taking into effect summer of 2011 where CitiFinancial will then be operating under the name OneMain Financial.

Citibank


Finally, the retail bank encompasses the Citi's global branch network, branded Citibank
Citibank
Citibank, a major international bank, is the consumer banking arm of financial services giant Citigroup. Citibank was founded in 1812 as the City Bank of New York, later First National City Bank of New York...

. Citibank is the third largest retail bank in the United States based on deposits (although it has considerably fewer retail branches than many of its smaller rivals), and it has Citibank branded branches in countries throughout the world, with the exception of Mexico; In Mexico Citigroup's bank operations are branded as Banamex is the country's second largest bank and a Citigroup subsidiary.

Citi Smith Barney


Citi Smith Barney was Citi's global private wealth management unit, providing brokerage, investment banking and asset management services to corporations, governments and individuals around the world. With over 800 offices worldwide, Smith Barney held 9.6 million domestic client accounts, representing $1.562 trillion in client assets worldwide.

Citi announced on January 13, 2009 that they would give Smith Barney to Morgan Stanley investment bank to combine their brokerage firms in exchange for $2.7 billion and 49% interest in the joint venture. Citi's urgent need for cash is reputed to be a driving force in this deal. Many have speculated that this may be the beginning of the end of Citi's "financial supermarket" approach.

Citi Institutional Clients Group


Citi announced on October 11, 2007 the formation of the new Institutional Clients Group comprising Citi Markets & Banking (CMB) and Citi Alternative Investments (CAI) with Vikram Pandit, then 50, as its Chairman and CEO. Vikram Pandit was promoted to CEO of the entire company two months later.

Containing Citi's most market-sensitive divisions, "ICG" is divided into two primary businesses: "Global Capital Markets and Banking" and "Global Transaction Services" (GTS). Global Capital Markets and Banking provides investment- and commercial-banking services covering institutional brokerage, advisory services, foreign exchange, structured products, derivatives, loans, leasing, and equipment finance. Meanwhile, GTS offers cash-management, trade finance and securities services to corporations and financial institutions worldwide. ICG is responsible for around 32% of Citigroup's annual revenues, generating just under US $30 billion in 2006 financial year.

Citi is reportedly advising ABRY Partners
ABRY Partners
ABRY Partners is a private equity firm headquartered in Boston, Massachusetts that focuses on investments in media. Since 1989, the firm has completed over $18.0 billion of leveraged transactions and other private equity and mezzanine investments, representing investments in more than 450 media...

 upon the possible sale of Monitronics
Monitronics
Monitronics International was founded in 1994 and is one of the three largest security alarm monitoring companies in the United States. Headquartered in Dallas, the company provides burglar and fire alarm monitored security system services approximately 800,000 residential and commercial customers...

 in 2010.

Citi Private Bank


Citi Private Bank provides banking and investment services to high net worth individuals, private institutions, and law firms. Acting as a gateway to all of Citigroup's products, Citi Private Bank offer traditional investment products and alternative choices, with all clients assigned a Private Banker to personally deal with their portfolio. Formerly part of Global Wealth Management, Citi Private Bank is now merged into Citi's Institutional Clients Group.

Citi Investment Research


Citi Investment Research is Citi's equities research unit, with 390 research analysts across 22 countries. Citi Investment Research covers 3,100 companies, representing 90 percent of the market capitalization of the major global indices, providing macro and quantitative analysis of global markets and sector trends. Formerly part of Global Wealth Management, Citi Investment Research is now merged into Citi's Institutional Clients Group.

Citi Alternative Investments


Citi Alternative Investments (CAI) is an alternative investment platform that manages assets across five classes – private equity, hedge funds, structured products, managed futures, and real estate. Across 16 "boutique investment centers", it offers various funds or separate accounts that utilize alternative investment strategies, as opposed to the mainstream mutual funds that it recently sold to Legg Mason
Legg Mason
Legg Mason, Inc. is an American-based global investment management firm with a focus on asset management. The company’s business is divided in two divisions: Americas and International...

. CAI manages Citigroup proprietary capital as well as institutional investments from third-parties and high-net-worth investors. As of June 30, 2007, CAI holds US$59.2 billion under capital management, and contributed 7% of Citigroup's 2006 income. In 2010, Citigroup agreed to sell its private equity unit to Lexington Partners
Lexington Partners
Lexington Partners, is a leading independent manager of secondary private equity and co-Investment funds, founded in 1994. Lexington Partners manages approximately $18 billion of which $3.8 billion was committed to the firm's sixth and latest fund .Lexington was founded by former investment...

 for about $900 million, according to PE Hub, reported by Reuters. StepStone Group will provide management services for the unit. The sale would mark another step in Citigroup's efforts to unload its unwanted assets.

Citi


Through Citicorp and Citi Holdings, Citi provides consumers, corporations, governments and institutions with a range of financial products and services, including consumer banking and credit, corporate and investment banking, securities brokerage, transaction services, and wealth management.

Citibank


Found in more than 100 countries, Citibank delivers a wide array of banking, lending and investment services to individual consumers, as well as to small businesses with up to $10 million in annual sales. Citibank also offers a full range of financial services products to serve the needs of small and large corporations, governments, and institutional and individual investors.

One Main Financial


Formerly known as CitiFinancial, One Main Financial provides community-based lending services through a branch network system. Consumer loan services include real estate-secured loans, unsecured and partially secured personal loans, and loans to finance consumer goods. Preparing for efforts to sell the unit, Citigroup announced the name change from CitiFinancial in December 2010, with nationwide signage changes occurring July 1, 2011.

Citi Capital Advisors


Creates and delivers a broad offering of investments, including fixed income, private equity, and infrastructure

Citi Cards


Citi Cards is a provider of credit cards with more than 150 million accounts generating more than $144 billion in receivables. Citi Cards is the largest consumer business within Citi employing more than 32,000 employees at more than 30 sites across North America.

Citi Private Bank


The Citi Private Bank provides wealthy individuals a range of finance, banking, investment, trust and advisory services.

Citi Institutional Clients Group


Citi Institutional Clients Group provides investment and commercial banking services and is organized into five groups: Global Banking, Global Markets, Global Transaction Services, Citi Capital Advisors and the Citi Private Bank.

Citi Investment Research


Citi Investment Research is a research unit composed of 390 research analysts across 22 countries. The unit covers 3,100 companies and provides macro and quantitative analysis of global markets and sector trends.

Citi Microfinance


Citi Microfinance works with the microfinance sector to broaden the reach of financial services including providing direct and structured financing, access to local capital markets, leasing, individual lending through MFI partners, foreign exchange and interest rate hedging, remittances and insurance.

Banamex


Banamex is Mexico's largest commercial bank in terms of equity and earnings, and Citigroup's access to the Mexican and Latin American markets.

Woman & Co.


Women & Co. is a membership program that addresses the unique financial facts of women's lives.

Real estate




Citigroup's most famous office building is the Citigroup Center
Citigroup Center
The Citigroup Center is one of the ten tallest skyscrapers in New York City, United States, located at 53rd Street between Lexington Avenue and Third Avenue in midtown Manhattan...

, a diagonal-roof skyscraper located in East Midtown
Midtown Manhattan
Midtown Manhattan, or simply Midtown, is an area of Manhattan, New York City home to world-famous commercial zones such as Rockefeller Center, Broadway, and Times Square...

, Manhattan
Manhattan
Manhattan is the oldest and the most densely populated of the five boroughs of New York City. Located primarily on the island of Manhattan at the mouth of the Hudson River, the boundaries of the borough are identical to those of New York County, an original county of the state of New York...

, New York City, which despite popular belief is not the company's headquarters building. Citigroup has its headquarters across the street in an anonymous-looking building at 399 Park Avenue
399 Park Avenue
399 Park Avenue is a 41-story office building that is the world headquarters of Citigroup in New York City, United States.Citigroup's chairman and chief executive officer operate from the building's second floor...

 (the site of the original location of the City National Bank). The headquarters is outfitted with nine luxury dining rooms, with a team of private chefs preparing a different menu each day. The management team is on the second and third floors above a Citibank branch. Citigroup also leases a building in the TriBeCa
TriBeCa
Tribeca is a neighborhood in Lower Manhattan, New York in the United States. Its name is an acronym based on the words "Triangle below Canal Street", and is properly bounded by Canal Street, West Street, Broadway, and Vesey Street...

 neighborhood in Manhattan at 388 Greenwich St, that serves as headquarters for its Investment and Corporate Banking operations and was the former headquarters of the Travelers Group.

Strategically, all of Citigroup's New York City real estate, excluding the company's Smith Barney division and Wall Street trading division, lies along the New York City Subway
New York City Subway
The New York City Subway is a rapid transit system owned by the City of New York and leased to the New York City Transit Authority, a subsidiary agency of the Metropolitan Transportation Authority and also known as MTA New York City Transit...

's IND Queens Boulevard Line
IND Queens Boulevard Line
The Queens Boulevard Line is a fully underground line of the B Division of the New York City Subway in Manhattan and Queens, New York City, United States. The line provides crosstown service across Manhattan under 53rd Street and east through Queens to Jamaica...

, served by the trains. Consequently, the company's Midtown buildings—including 787 Seventh Avenue, 666 Fifth Avenue, 399 Park Avenue, 485 Lexington, 153 East 53rd Street (Citigroup Center), and Citigroup Building in Long Island City, Queens
Long Island City, Queens
Long Island City is the westernmost neighborhood of the borough of Queens in New York City. L.I.C. is notable for its rapid and ongoing gentrification, its waterfront parks, and its thriving arts community. L.I.C. has among the highest concentration of art galleries, art institutions, and studio...

, are all no more than two stops away from each other. In fact, every company building lies above or right across the street from a subway station served by the trains.

Chicago also plays home to an architectural beauty operated by Citigroup. Citicorp Center
Citicorp Center (Chicago)
Citigroup Center is a 42 story, 588-foot skyscraper in Chicago, Illinois. Located at 500 W. Madison , the structure was designed by the architecture firm Murphy/Jahn in a late modernist style...

 has a series of curved archways at its peak, and sits across the street from major competitor ABN AMRO
ABN AMRO
ABN AMRO Bank N.V. is a Dutch state-owned bank with headquarters in Amsterdam. It was re-established, in its current form, in 2009 following the acquisition and break up of ABN AMRO Group by a banking consortium consisting of Royal Bank of Scotland Group, Santander and Fortis...

's ABN AMRO Plaza
ABN AMRO Plaza
ABN AMRO Plaza is an office building located in the West Loop area of Chicago, Illinois, United States. ABN AMRO, parent company of Chicago financial institution LaSalle Bank owns and operates the building. To the east sits Citicorp Center building and to the south, residential-complex of...

. It has a host of retail and dining facilities serving thousands of Metra
Metra
Metra is the commuter rail division of the Illinois Regional Transportation Authority. The system serves Chicago and its metropolitan area through 240 stations on 11 different rail lines. Throughout the 21st century, Metra has been the second busiest commuter rail system in the United States by...

 customers daily via the Ogilvie Transportation Center
Ogilvie Transportation Center
The Richard B. Ogilvie Transportation Center is a passenger terminal in downtown Chicago, Illinois, USA, serving the three commuter rail lines of Metra's Union Pacific District, which approach the terminal elevated above street level. It occupies the lower floors of the Citigroup Center...

.

Citigroup has obtained naming rights to Citi Field, the home ballpark of the New York Mets
New York Mets
The New York Mets are a professional baseball team based in the borough of Queens in New York City, New York. They belong to Major League Baseball's National League East Division. One of baseball's first expansion teams, the Mets were founded in 1962 to replace New York's departed National League...

 Major League Baseball
Major League Baseball
Major League Baseball is the highest level of professional baseball in the United States and Canada, consisting of teams that play in the National League and the American League...

 team, who began playing their home games there in 2009.

Raul Salinas and alleged money laundering


In 1998, the General Accounting Office issued a report critical of Citibank's handling of funds received from Raul Salinas de Gortari
Raúl Salinas de Gortari
Raúl Salinas de Gortari is a Mexican businessman.Raúl Salinas is the brother of former President of Mexico Carlos Salinas. He is best known for being convicted of masterminding the killing of José Francisco Ruiz Massieu, his former brother-in-law, although he was acquitted upon appeal in 2005...

, the brother of Carlos Salinas
Carlos Salinas
Carlos Salinas de Gortari is a Mexican economist and politician affiliated to the Institutional Revolutionary Party who served as President of Mexico from 1988 to 1994. Earlier in his career he worked in the Budget Secretariat all the way up to Secretary...

, the former president of Mexico. The report, titled "Raul Salinas, Citibank and Alleged Money Laundering", indicated that Citibank facilitated the transfer of millions of dollars through complex financial transactions to hide the paper trail of funds. The report also indicated that Citibank took on Raul Salinas as a client even though they did not make a thorough inquiry as to how he made his fortune.

Conflicts of interest on investment research


In December 2002, Citigroup paid fines totaling $400 million, with the amount split between the states and the federal government. The fines were part of a settlement involving charges that ten banks, including Citigroup, deceived investors with biased research. The total settlement with the ten banks was $1.4 billion. The settlement required that the banks separate investment banking from research, and ban any allocation of IPO shares.

Plutonomy memo


On October 16, 2005, a memo detailing how America was losing its grasp as a democracy, but rather becoming a Plutonomy. The memo was leaked to the public causing outcry against the memo's secretive nature of keeping the nation's wealthiest 1% in power over America through politics.

Enron, WorldCom and Global Crossing bankruptcies


Citigroup paid out over $3 billion in fines and legal settlements for their role in financing Enron
Enron
Enron Corporation was an American energy, commodities, and services company based in Houston, Texas. Before its bankruptcy on December 2, 2001, Enron employed approximately 22,000 staff and was one of the world's leading electricity, natural gas, communications, and pulp and paper companies, with...

 Corporation, which collapsed amid a financial scandal in 2001. In 2003, Citigroup paid $145 million in fines and penalties to settle claims by the Securities and Exchange Commission and the Manhattan district attorney's office. In 2005, Citigroup paid $2 billion to settle a lawsuit filed by investors in Enron. In 2008, Citigroup paid $1.66 billion to the Enron Bankruptcy Estate, which represented creditors of the bankrupt company. In 2004, Citigroup paid $2.65 billion to settle a lawsuit concerning their role in selling stocks and bonds for WorldCom, which collapsed in 2002 in an accounting scandal. In 2005, Citigroup paid $75 million to settle a lawsuit from investors in Global Crossing
Global Crossing
Global Crossing Limited was a telecommunications company that provides computer networking services worldwide. It maintained a large backbone and offered transit and peering links, VPN, leased lines, audio and video conferencing, long distance telephone, managed services, dialup, colocation and...

, which filed bankruptcy in 2002. Citigroup was accused of issuing exaggerated research reports and not disclosing conflicts of interest.

Citigroup proprietary government bond trading scandal


Citigroup was criticized for disrupting the European bond market
Bond market
The bond market is a financial market where participants can issue new debt, known as the primary market, or buy and sell debt securities, known as the Secondary market, usually in the form of bonds. The primary goal of the bond market is to provide a mechanism for long term funding of public and...

 by rapidly selling €11 billion worth of bonds on August 2, 2004 on the MTS Group trading platform, driving down the price, and then buying it back at cheaper prices.

2005 "Revisiting Plutonomy: The Rich Getting Richer" equity strategy public investment advisory


In 2005, Citigroup published an investment advisory for current and potential Citi investors entitled "Revisiting Plutonomy: The Rich Getting Richer" which declared, "Asset booms, a rising profit share and favorable treatment by market-friendly governments have allowed the rich to prosper...[and] take an increasing share of income and wealth over the last 20 years..."

"...the top 10%, particularly the top 1% of the US-- the plutonomists in our parlance-- have benefited disproportionately from the recent productivity surge in the US...[and] from globalization and the productivity boom, at the relative expense of labor."

"...[and they] are likely to get even wealthier in the coming years. [Because] the dynamics of plutonomy are still intact."

Regulatory action


In 2004, Japanese regulators took action against Citibank Japan in connection with making loans to a customer involved in stock manipulation. This action included suspension of bank activities in one branch and three offices, and restrictions on their consumer banking division. In 2009, the Japanese regulators again took action against Citibank Japan, this time in regard to the bank not setting up an effective money laundering
Money laundering
Money laundering is the process of disguising illegal sources of money so that it looks like it came from legal sources. The methods by which money may be laundered are varied and can range in sophistication. Many regulatory and governmental authorities quote estimates each year for the amount...

 monitoring system. The regulatory agency suspended sales operations within its retail banking operations for a month.

On March 23, 2005, the NASD announced total fines of $21.25 million against Citigroup Global Markets, Inc., American Express Financial Advisors and Chase Investment Services regarding suitability and supervisory violations relating to mutual fund sales practices between January 2002 and July 2003. The case against Citigroup involved recommendations and sales of Class B and Class C shares of mutual funds.

On June 6, 2007, the NASD announced more than $15 million in fines and restitution against Citigroup Global Markets, Inc., to settle charges related to misleading documents and inadequate disclosure in retirement seminars and meetings for BellSouth Corp. employees in North Carolina and South Carolina. NASD found that Citigroup did not properly supervise a team of brokers located in Charlotte, N.C., who used misleading sales materials during dozens of seminars and meetings for hundreds of BellSouth employees.

In July 2010, Citigroup agreed to pay $75 million to settle civil charges that it misled investors over potential losses from high-risk mortgages. The Securities and Exchange Commission said that Citigroup had made misleading statements about the company's exposure to subprime mortgages. In 2007, Citigroup indicated that their exposure was less than $13 billion, when in fact it was over $50 billion.

Terra Securities scandal


In November 2007 it became public that the Citigroup is heavily involved in the Terra Securities scandal
Terra Securities scandal
The Terra Securities scandal was a scandal that became public in November 2007. It involved highly speculative investments by eight municipalities of Norway in various hedge funds in the United States bond market. The funds were sold by Terra Securities to the municipalities, while the products...

, which involved investments by eight municipalities of Norway in various hedge funds in the United States bond market. The funds were sold by Terra Securities ASA
Terra Securities
Terra Securities ASA was a Norwegian security company that sold various financial instruments, index options, hedge funds and other investment securities through 78 local savings banks that are members of Terra-Gruppen. In 2006 it had a market share of 1.92 % on Oslo Stock Exchange, rating it as...

 to the municipalities, while the products were delivered by Citigroup. Terra Securities ASA filed for bankruptcy November 28, 2007, the day after they received a letter from The Financial Supervisory Authority of Norway
Financial Supervisory Authority of Norway
The Financial Supervisory Authority of Norway is a Norwegian government agency responsible for supervision of financial companies within Norway based on law and regulations from Storting, the Norwegian Ministry of Finance and international accounting standards...

 announcing withdrawal of permissions to operate. The same letter also stated, "The Supervisory Authority contends that Citigroup's presentation, as well as the presentation from Terra Securities ASA, appears insufficient and misleading because central elements like information about potential extra payments and the size of these are omitted."

Theft from customer accounts


On August 26, 2008 it was announced that Citigroup agreed to pay nearly $18 million in refunds and fines to settle accusations by California Attorney General Jerry Brown
Jerry Brown
Edmund Gerald "Jerry" Brown, Jr. is an American politician. Brown served as the 34th Governor of California , and is currently serving as the 39th California Governor...

 that it wrongly took funds from the accounts of credit card customers. Citigroup would pay $14 million of restitution to roughly 53,000 customers nationwide. A three-year investigation found that Citigroup from 1992 to 2003 used an improper computerized "sweep" feature to move positive balances from card accounts into the bank's general fund, without telling cardholders.

Brown said in a statement that Citigroup "knowingly stole from its customers, mostly poor people and the recently deceased, when it designed and implemented the sweeps...When a whistleblower uncovered the scam and brought it to his superiors, they buried the information and continued the illegal practice."

Bonuses controversy


According to New York Attorney General Andrew Cuomo
Andrew Cuomo
Andrew Mark Cuomo is the 56th and current Governor of New York, having assumed office on January 1, 2011. A member of the Democratic Party, he was the 64th New York State Attorney General, and was the 11th United States Secretary of Housing and Urban Development...

, after having received its $45 billion TARP funds in late 2008, Citigroup paid hundreds of millions of dollars in bonuses to more than 1,038 of its employees. This included 738 employees each receiving $1 million in bonuses, 176 employees each receiving $2 million bonuses, 124 each receiving $3 million in bonuses, and 143 each receiving bonuses of $4 million to more than $10 million. As a result of the criticism and the U.S. Government's majority holding of Citigroup's common shares, compensation and bonuses were restricted from February 2009 until December 2010.

2008–2009 federal rescue from bankruptcy


As the subprime mortgage crisis
Subprime mortgage crisis
The U.S. subprime mortgage crisis was one of the first indicators of the late-2000s financial crisis, characterized by a rise in subprime mortgage delinquencies and foreclosures, and the resulting decline of securities backed by said mortgages....

 began to unfold, heavy exposure to toxic mortgages in the forms of Collateralized debt obligation
Collateralized debt obligation
Collateralized debt obligations are a type of structured asset-backed security with multiple "tranches" that are issued by special purpose entities and collateralized by debt obligations including bonds and loans. Each tranche offers a varying degree of risk and return so as to meet investor demand...

s (CDOs), compounded by poor risk management, led the company into serious trouble. In early 2007, Citigroup began eliminating about 5 percent of its workforce in a broad restructuring designed to cut costs and bolster its long underperforming stock. By November 2008, the ongoing crisis hit Citigroup hard and despite federal TARP money, the company announced further staff cuts that eventually totaled over 100,000 employees. Its stock market value dropped to $20.5 billion, down from $244 billion two years earlier. As a result, Citigroup and federal regulators negotiated a plan to stabilize the company.

On November 24, 2008, the U.S. government announced a massive stimulus package for Citigroup, designed to rescue the company from bankruptcy while giving the government a major say in its operations. The Treasury would provide another $20 billion in Troubled Asset Relief Program (TARP) funds in addition to $25 billion given in October. The Treasury Department, the Federal Reserve and the Federal Deposit Insurance Corporation
Federal Deposit Insurance Corporation
The Federal Deposit Insurance Corporation is a United States government corporation created by the Glass–Steagall Act of 1933. It provides deposit insurance, which guarantees the safety of deposits in member banks, currently up to $250,000 per depositor per bank. , the FDIC insures deposits at...

 (FDIC) would cover 90% of the losses on its $335 billion portfolio after Citigroup absorbed the first $29 billion in losses. In return the bank would give Washington $27 billion of preferred shares and warrants to acquire stock. The government would obtain wide powers over banking operations. Citigroup agreed to try to modify mortgages, using standards set up by the FDIC after the collapse of IndyMac Bank
IndyMac Bank
OneWest Bank is a federal savings bank with 82 retail branches in southern California and approximately $14 billion in deposits as of February 2010....

, with the goal of keeping as many homeowners as possible in their houses. Executive salaries wou;d be capped.

As a condition of the federal assistance, Citigroup's dividend payment was reduced to one cent per share.

In September 2011, a book titled Confidence Men|Confidence Men: Wall Street, Washington and the Education of a President, written by former Wall Street reporter Ron Suskind
Ron Suskind
Ron Suskind is a Pulitzer Prize winning American journalist and best-selling author. He was the senior national affairs writer for The Wall Street Journal from 1993 to 2000 and has published the books A Hope in the Unseen, The Price of Loyalty, The One Percent Doctrine, The Way of the World and...

, states that Treasury Secretary Timothy Geithner ignored a 2009 order from President Barack Obama
Barack Obama
Barack Hussein Obama II is the 44th and current President of the United States. He is the first African American to hold the office. Obama previously served as a United States Senator from Illinois, from January 2005 until he resigned following his victory in the 2008 presidential election.Born in...

 to break up Citigroup in an enormous restructuring and liquidation. According to the book, Obama wanted to consider restructuring the bank into several leaner and smaller companies while Geithner was executing stress tests of American financial institutions. Another book, A Presidency in Peril by Robert Kuttner
Robert Kuttner
Robert Kuttner is an American journalist and writer. Kuttner is the co-founder and current co-editor of The American Prospect, which was created in 1990 as "an authoritative magazine of liberal ideas," according to its mission statement...

, says that in spring 2009 Geithner and chief economic adviser Larry Summers believed that they could not seize, liquidate, and break up Citigroup because they lacked the legal authority or the tools to do so.

The Treasury Department denied the account in an e-mail to the media stating "This account is simply untrue. The directive given by the president in March 2009 was to develop a contingency plan for tough restructurings if the government ended up owning large shares of institutions at the conclusion of the stress tests that Secretary Geithner worked aggressively to put in place as part of the Administration's Financial Stability Plan. While Treasury began work on those contingency plans, there was fortunately never a need to put them in place."

Political donations


Citigroup is the 16th largest political campaign contributor in the United States, out of all organizations, according to the Center for Responsive Politics
Center for Responsive Politics
The Center for Responsive Politics is a non-profit, nonpartisan research group based in Washington, D.C. that tracks money in politics and the effect of money and lobbying activity on elections and public policy and maintains a public online database of its information.Their database...

. According to Matthew Vadum, a senior editor at the conservative Capital Research Center
Capital Research Center
Capital Research Center is a conservative non-profit organization located in Washington, DC. It was founded in 1984 by Willa Johnson "to study non-profit organizations, with a special focus on reviving the American traditions of charity, philanthropy, and voluntarism." The group opposes the growth...

, Citigroup is also a heavy contributor to left-of-center political causes. However, members of the firm have donated over $23,033,490 from 1989–2006, 49% of which went to Democrats and 51% of which went to Republicans.

Lobbying and political advice


In 2009, Richard Parsons hired long-time Washington, D.C. lobbyist Richard F. Hohlt
Richard F. Hohlt
Richard Frederick Hohlt , founded The Hohlt Group in 1990 to provide government-relations counsel and strategic advice to a variety of clients...

 to advise Parsons and the company about relations with the U.S. government, though not to lobby for the company. While some speculated anonymously that the FDIC would have been a particular focus of Mr. Hohlt's attention, Hohlt said he'd had no contact with the government insurance corporation. Some former regulators found room to criticize, in the news report, Mr. Hohlt's involvement with Citigroup, because of his earlier involvement with the financial-services industry during the savings and loan crisis
Savings and Loan crisis
The savings and loan crisis of the 1980s and 1990s was the failure of about 747 out of the 3,234 savings and loan associations in the United States...

 of the 1980s. Mr. Hohlt responded that though mistakes were made in the earlier episode, not to mention by other more recent clients of his like Fannie Mae and Washington Mutual
Washington Mutual
Washington Mutual, Inc. , abbreviated to WaMu, was a savings bank holding company and the former owner of Washington Mutual Bank, which was the United States' largest savings and loan association until its collapse in 2008....

, he'd never been investigated by any government agency and his experience gave him reason to be back in the "operating room" as parties address the more recent crisis.

Public and governmental relations


In 2010, the company named Edward Skyler
Edward Skyler
Edward "Ed" Skyler [born April 11, 1973) was the Deputy Mayor for Operations for New York City, the youngest deputy mayor in New York City's history. In 2010, he was named the senior public and governmental relations executive at Citigroup....

, formerly in New York City government and at Bloomberg LP, to its senior public and governmental relations position. Before Skyler was named and before he began his job search, the company reportedly held discussions with three other individuals to fill the position: NY Deputy Mayor Kevin Sheekey
Kevin Sheekey
Kevin Sheekey is an American businessman and political adviser. He is head of government relations and communications at Bloomberg L.P. and chairman of Bloomberg Government. Sheekey previously served as deputy mayor for government affairs for the City of New York City under Mayor Michael R....

, Mayor Michael Bloomberg
Michael Bloomberg
Michael Rubens Bloomberg is the current Mayor of New York City. With a net worth of $19.5 billion in 2011, he is also the 12th-richest person in the United States...

's "political guru ... [who] spearheaded ... his short-lived flirtation with a presidential run ..., who will soon leave City Hall for a position at the mayor's company, Bloomberg L.P. .... After Mr. Bloomberg's improbable victory in the 2001 mayor's race, both Mr. Skyler and Mr. Sheekey followed him from his company to City Hall. Since then, they have been a part of an enormously influential coterie of advisers"; Howard Wolfson
Howard Wolfson
Howard Wolfson is counselor to the Mayor of New York City and a Democratic political strategist. He replaced Kevin Sheekey as Deputy Mayor of New York City for governmental affairs....

, the former communications director for Hillary Rodham Clinton
Hillary Rodham Clinton
Hillary Diane Rodham Clinton is the 67th United States Secretary of State, serving in the administration of President Barack Obama. She was a United States Senator for New York from 2001 to 2009. As the wife of the 42nd President of the United States, Bill Clinton, she was the First Lady of the...

's presidential campaign and Mr. Bloomberg's re-election bid; and Gary Ginsberg
Gary Ginsberg
Gary Ginsberg is a lawyer, American political operative and corporate adviser who worked as a lawyer in the Clinton White House. After time at George and eleven years at News Corporation, he is currently at Time Warner.- Biography :...

, now at Time Warner
Time Warner
Time Warner is one of the world's largest media companies, headquartered in the Time Warner Center in New York City. Formerly two separate companies, Warner Communications, Inc...

 and formerly at News Corporation
News Corporation
News Corporation or News Corp. is an American multinational media conglomerate. It is the world's second-largest media conglomerate as of 2011 in terms of revenue, and the world's third largest in entertainment as of 2009, although the BBC remains the world's largest broadcaster...

.

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