Citigroup - ASTA/Mat update

Citigroup CEO Vikram Pandit seems to be caught in the crossfire of the banks misdoings and deservedly so. Investor lawsuits connected to the marketing and sale of a group of proprietary Citigroup hedge funds sold under the brand names ASTA and MAT were emerging at an alarming rate. Marketed to investors as safe fixed-income funds with losses not to exceed 5%, the hedge funds fell by a large amount in the midst of the credit crunch. Ultimately, the value of the funds suffered a loss of between 60% to 80% and many investors lost their life savings as a result.

Legal issues surrounding ASTA/MAT aren’t the only problems facing Pandit. Adding to his woes: $36 billion of net losses during the past six quarters.

More criticism was levied on Pandit courtesy of Sheila Bair, chairman of the Federal Deposit Insurance Corp. (FDIC). In a story appearing June 5, 2009 in the Wall Street Journal, it was reported that Bair’s office had been maneuvering to oust various members of Citigroup’s top executives. Specific individuals were not identified in the Wall Street Journal story, but Pandit’s name was rumored to be among those on Bair’s list.

Adding fuel to Citi’s management shake-up rumor mill is the apparent delay of a stock swap agreement between the U.S. Treasury Department and Citigroup. Announced in March 2009, the deal entails converting $53 billion of Citigroup preferred stock into common shares, giving the U.S. government a 34% stake in the bank.

Another black mark occurred for Citigroup on June 1, 2009 which signaled the bank’s final day on as part of the Dow Jones Industrial Average. On Monday, June 8 last year Citigroup was replaced by The Travelers Companies.

Following the initiation of the federal government’s Troubled Asset Relief Program (TARP), Citigroup was named a recipient of $45 billion in taxpayer funds after the bank began to watch its stock consistently deteriorate throughout 2008 and 2009. In mid-January 2009, Citigroup shares traded below $5 and on June 8, 2009 the stock closed at a shocking low of $3.42; by comparison, the price was reported at $20.48 per share one year prior at the same time.