The FDIC is Not Buying What Citi is Selling

This news item verges on funny.

Readers may have taken note of the fact that Citigroup was ordered by the FDIC to conduct a review of management. The floundering bank hired Egon Zehnder. The New York Times indicated that the resulting report was awfully favorable, given that the bank is one of the biggest messes in the international financial arena. If management is not to blame, then who is?

The management review, requested by federal regulators after months of turmoil, gave Citigroup’s senior executives good marks over all and took a satisfactory view of the leadership of Vikram S. Pandit, the chief executive, said the person and others with knowledge of the situation. Still, the report took a harsher stance on some of Mr. Pandit’s top deputies.

As we remarked yesterday, “Stress tests redux. If this is the conclusion, clearly there is something wrong with the scorecard.”It’s pretty obvious what happened here. Egon Zehnder is a search firm. Search firms have recently gotten into the very curious business of doing senior management assessments in recent years. No one would deem it logical to engage a mergers and acquisitions banker to evaluate how well a business was performing, yet we have people with similarly narrow competence making broad judgments that are beyond their expertise, their claims to the contrary. But this shamanism is well accepted in boardrooms these days, since having outside parties vet decisions is yet another way to shed responsibility.

So how does this look from the Egon Zehnder end? Follow the money. Citi is a big meal ticket. The FDIC, who asked for this review, is in no way, shape, or form the client. The purpose of this exercise is to deliver a credible sounding report without annoying Citi so Zehnder can use this entree to deepen its relationship and win search mandates, or at least more management reviews.

The problem is that a report that would not ruffle Citi was unlikely to be seen as credible by anyone with an operating brain cell, including the FDIC. From today’s Wall Street Journal:

To read the original article click here

Other articles of interest...
How The Fate Of The Equity Market Lies In A $8,000 Tax Credit
It is a curious state of affairs
AP, News Corp bosses tell search engines to pay up
The leaders of two of the world's major news organizations said Friday that it is time for search engines and others who use news content for free to pay up.
Bernanke Ready to Tighten When Recovery Sufficient
Federal Reserve Chairman Ben S. Bernanke said the central bank will be prepared to tighten monetary policy when the outlook for the economy “has improved sufficiently.”
Derivatives Lobby Links With New Democrats to Blunt Obama Plan
As President Barack Obama vowed in a Sept. 14 speech in New York’s Federal Hall to correct “reckless behavior and unchecked excess” on Wall Street, Mike McMahon and Barney Frank sat in the audience discussing how to ease proposed rules for the $592 trillion over-the-counter derivatives market.