By Binyamin Appelbaum
Washington Post Staff Writer
Saturday, January 10, 2009
Robert Rubin, a key figure in the U.S. financial boom as Treasury secretary and then as a senior adviser at Citigroup, announced his retirement from the troubled New York bank yesterday in the latest sign that Citigroup wants to break from its recent past.
Rubin joined Citigroup in 1999, soon after the company emerged as a financial services giant. He has since earned more than $115 million as Citigroup has suffered through setbacks and missteps that culminated in a November bailout by the federal government.
His departure completes a turnover in the company's leadership that began with the replacement of chief executive Charles Prince in December 2007.
Citigroup is attempting a broad overhaul of its battered operations and its tattered reputation. The company, which has lost more than $20 billion in the past year, is taking standard steps such as cutting employees, selling businesses and cleaning up bad loans. It also has embarked on a campaign to repair its image, including Thursday's dramatic announcement that Citigroup had broken with the rest of the banking industry to support legislation allowing bankruptcy courts to modify mortgage loans in the hopes of preventing foreclosures.
Citigroup, the long-time champion of free markets and deregulation, is increasingly dependent on the federal government, which has invested more than $50 billion to help it weather the economic crisis. That means the company must pay more attention to public and congressional concerns than other banks. At the same time, regulators who are increasingly involved in the company's affairs have encouraged the company to improve its reputation, in part because in banking, perceptions shape realities.
Prince's replacement as chief executive, Vikram Pandit, has said the company is trying to "get fit."
In November, Citigroup announced plans to cut 50,000 jobs. Businesses in India and Germany and Japan have been sold; other units are on the market.
The company also said it would modify up to 500,000 mortgage loans, and on New Year's Eve, the company announced that Rubin, Pandit and chairman Win Bischoff would not receive annual bonuses.
Regulators have taken an increasingly active role in guiding the company's daily and long-term decisions. The Office of the Comptroller of the Currency and the Federal Reserve have devoted additional staff to scrutinize the company's operations, and to push the company to make decisions that regulators think will return it to safe and stable profitability.
"We remain focused on executing our strategy driven by our core businesses," the company said in a statement responding to questions about its overhaul. "We believe the benefits will be seen over time."
Rubin and Citigroup rose up together. Rubin was appointed Treasury secretary by President Bill Clinton in 1995, and in that role he championed financial deregulation, including a law that allowed banks to merge with insurance companies. Citigroup was the main result, a company that combined insurance with retail and investment banking, the nation's largest financial institution.
When Rubin left the government, he joined the company.
His position was singular. He did not lead the company, he advised the people who led the company. But some shareholders say he shares responsibility for Citigroup's deep and ultimately costly involvement in high-risk financial markets, which have now collapsed.
In a resignation letter sent to Pandit, Rubin, 70, wrote that he was leaving to focus on public policy issues, including national economic policy, community development lending and the economic development of Africa.
"My great regret is that I and so many of us who have been involved in this industry for so long did not recognize the serious possibility of the extreme circumstances that the financial industry faces today," Rubin wrote.
Rubin, also a Citigroup director, said he would not stand for reelection at the company's next annual meeting.