John S. Reed helped realizing the merger that created Citigroup Inc. He now apologized for his role building a company that needed $ 45 billion of U.S. aid!
Citigroup came into existence in 1998, when Citicorp, a commercial bank, merged with Sanford I. Weill’s Travelers Group Inc, this group owned the investment firm Salomon Smith Barney Holdings Inc. The new company lost $27.7 billion in 2008. 34% of the company is now owned by the Treasury Department, this because they needed help in times of financial crisis.
Reed headed Citicorp for 14 years until the merger with Travelers, with this deal, they created the world’s biggest financial company in a stock swap, with a value of $85 billion. Reed and Weill were co-chairman and CEO’s until Reed’s retirement in 2000.
In two years time, Reed received a salary and bonuses of $23. 4 million and on his retirement he received a bonus of $5 million!
Citigroup is still suffering the financial crisis. As the third-largest U.S. bank, they shed $300 billion in assets, this is 13% of its total. They are also selling their non-core properties. Since 2007 100,000 of employees lost their jobs
Reed now pleads for more financial regulations like ordering banks to hold more capital, declining the executives’ compensations. But the most important he pleads for separating the consumer banking from trading bonds and equity.
In my opinion Reed is not the only one who had to say sorry. I think the whole board of directors contributed to the problems of Citigroup. But also the U.S. government affected to it. The control was worthless! If they controlled Citigroup better, they would know their investments and they could have stopped them! Because the major problem were the junk bonds.
I think that the merger was a good idea but they took it on wrong!
By: De Ridder Steffie
Source: http://www.bloomberg.com/apps/news?pid=20601109&sid=albMYVE7D578&pos=12
In my opinion I think it is a very nice gesture of John S. Reed. But as Steffie said it is not only the fault of Mister Reed, the whole board can be blaimed for it.
BeantwoordenVerwijderenBut I do think that Mister Reed has a point by saying that companies have to lower the compensations for retirement for the executives.
And I also think that the banks have to seperate their activities in insurance and bank companies and the most important statement according to me is: when you sell a product know what you are selling!
Ruth Blommaert