Courtesy of Pam Martens.
John Reed, former Co-Chairman and Co-CEO of Citigroup, Tells a Senate Banking Panel on February 4, 2010 That He Created “a Monster” With the Citigroup Merger
April 18, 2000 was the day John Reed retired from Citigroup, pushed out in a board room coup, leaving Sandy Weill the sole Chairman and CEO. In 1998, the two had, with great fanfare, merged the FDIC-insured Citibank with Salomon Smith Barney, an investment bank and brokerage firm, and insurance companies controlled by Travelers Group to create the global behemoth known as Citigroup. The pair had initially served as Co-Chairmen and Co-CEOs. At the time, the deal violated the Glass-Steagall Act, the Depression era law which barred firms primarily engaged with underwriting securities to affiliate with insured banks. The Bill Clinton administration would obligingly repeal the Glass-Steagall Act the year after the Citigroup merger.
At the close of trading on April 18, 2000, the day Reed stepped down, 100 shares of Citigroup were worth $6,212. Today, a decade and a half later, that 100 shares has shrunk to 13.33 shares with a value of $729.82. (Citigroup did a 4 for 3 stock split on August 25, 2000 and a 1 for 10 reverse split on May 9, 2011.) In other words, your value as a shareholder has been decimated by 88 percent.
Your tantalizing ride as a shareholder has also had plenty of thrills and chills you likely didn’t bargain for: like watching your stock trade at 99 cents after the 2008 financial crash when Citigroup became the recipient of the largest taxpayer bailout in U.S. history with $45 billion in equity infusions, over $300 billion in government asset guarantees, and over $2 trillion in cumulative, secret, below-market rate loans from the Federal Reserve from 2007 to 2010 to shore up Citigroup’s insolvent carcass.
Citigroup flopped because Sandy Weill and John Reed sold the dystopian banking model of a financial supermarket that would cross-sell all of its wares to savvy investors who would reap the rewards of one stop shopping. Instead, Citigroup fleeced the least sophisticated investor, built a black hole of off balance sheet debt, pumped and dumped toxic derivatives into the financial infrastructure and became the poster child of Wall Street greed, excess and regulatory failure.
So that’s how shareholders made out. How did Sandy Weill and John Reed make out? It is well known that Weill went on to become a billionaire on the backs of Citigroup shareholders. Much less has been written about Reed’s financial rewards for helping to create a financial Hindenburg.
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