Wednesday, October 21, 2009

VikiP, Citi CEO, on Morality in Banking

My former Dear Leader, VikiP, was recently interviewed by Welt am Sonntag, a German weekly, to get his perspective on a few issues. He ended up dodging faster than Neo in the Matrix. Some snippets:

Welt am Sonntag: Mr. Pandit, you studied electrical engineering. How often in recent months have you asked yourself why you didn't remain an engineer?

Vikram Pandit: To be honest with you, I was never a particularly good engineer.

Based on Old Lane and Citi's performances, I'd say he's consistent in career performance.

WaS: How are we going to get morality and decency back into banking? Have values like these ever actually counted in the business operations of the Wall Street banks?

Pandit: I can't speak for Wall Street as a whole. Citigroup, at least, has changed considerably in the past 18 months - it's no longer the same company as before the crisis. We've focused on what we can do best, what customers and investors expect from us. This process has not yet been completed, but we've already achieved a lot. Nowadays we're much leaner than we used to be. But the biggest difference lies in how we run our business and what sort of corporate culture we stand for.

Is VikiP incapable of hearing "morality" or just incapable of speaking about it?

WaS: And that means?
Nice work, Welt am Sonntag! US interviews never try to get a follow-up to a weasel.

Pandit: The customer is always the paramount focus. What matters most are the customers, not the products.

And this is why US interviewers have given up on cornering the weasel. BUT, basically, VikiP admits they weren't focused on customers before. And you're a BANK -- what products do you actually have?

WaS: That's what every banker tells us.
Is it just me, or is the interviewer a bit annoyed with the BS?

Pandit: Maybe. But what matters is not what people say, but what they do.

Except, apparently, CEOs of major banks.

WaS: Is it responsible to pay a single employee $100 million a year, like the boss of your raw materials unit Phibro, which you've meanwhile sold?

Pandit: It is, of course, a legitimate view to maintain that a sum like that is simply too high. As far as I'm concerned, however, it's more crucial to get the remuneration structure right. The entire bank sector needs to get its act together here. We mustn't encourage bankers to take inappropriate risks for which ultimately the banks have to carry the can, not the staff concerned.

Note he doesn't say that the remuneration structure is shifted too much toward huge bonuses for execs. Or even that remuneration is too high.

WaS: But doesn't the example of Phibro show that there ought to be an absolute upper limit as well?

Pandit: I don't think that's the right approach. We have to reward staff when they perform, and pay competitive salaries. It's the structure that's important in this context, not the level, it's question of whether the incentives are right or wrong.

I.e., I am not going to give up my ability to pay employees whatever they claim to be worth

WaS: But isn't the financial sector being driven far too much by money? Even long-serving investment bankers are complaining that for years now the talk is only of bigger, higher, further.

Pandit: I can comprehend that this is how it's perceived by the public, as if greed were the only motivation on Wall Street. At Citi, we always endeavored to recruit staff who primarily wanted to help their customers.

I worked for Citi for almost 8 years, and this was never anything more than lip service. If I could have shown that publicly sodomizing customers was profitable, the Glass-Steagall Act wouldn't have been the only legislation that was paid to be eliminated by Citi lobbyists.

More tomorrow -- I figure you've all had enough Citi-related bitterness from me for a day.

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