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The Pundit Who Bruised Citibank
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While the continuing drop of Citigroup shares may seem to vindicate her sell rating, there is much dispute about her analysis. Some of her peers at other brokerage firms believe her concerns about Citigroup's capital levels are overstated and do not envision the company cutting dividends. Robert Rubin, who is filling in as chairman of Citigroup after the resignation of Charles Prince, told analysts last week that the dividend would be maintained. Prince was the second head of a major Wall Street firm to step down in the face of large write-downs in the third quarter.
Still others think Whitney should have downgraded the stock sooner, noting that her report came only after Citigroup acknowledged big losses and after the stock had shed a fifth of its value.
Whitney said she had raised concerns about Citigroup before she downgraded the stock from her neutral rating.
"Capital ratios eroded to such an alarming level in the third quarter," she said. "It was catalyst driven."
Steve Eisman, a hedge fund manager who supervised Whitney when she was a junior analyst at Oppenheimer in the mid-to-late 1990s, said she did not shy away from making a call that might anger shareholders and management. He noted that she worked with him when his team downgraded several companies in the subprime auto-lending industry in the late 1990s. Many of those companies went bankrupt.
"Meredith is not afraid to say what she thinks," Eisman said. "I think her call on Citi was dead on. She stripped the company naked."
One day in 2003, when she was on a Fox News financial show, a guest recommended Citigroup. John Layfield, a former champion pro wrestler and stock guru, had come on the show to publicize his book. Whitney asked Layfield why he would be promoting Citigroup stock in a rising interest rate environment, which historically has not been friendly to financial stocks.
"She just absolutely dissected me on national television," recalled Layfield.
The two nevertheless hit it off at a dinner after the show. They married in 2005.
