Remember our old friend Prof. Steve Davidoff of THE Ohio State University, he of the buggered explanation of the Foreign Sovereign Immunities Act? This time around he has written a very interesting piece in the N.Y. Times on the goings-on at J.P. Morgan and the attempt to separate the roles of Chairman and CEO presently held by the World's Greatest Banker, Jaime Diamon...until a self-proclaimed large mammal in London managed to get it all wrong to the tune of $6.5 billion.
Anyway, Prof. Steve explores the issue and correctly points out that all of the hoot and hollar about the benefits of separating the two jobs if the belief is that banks are too big to be managed by one person is really silly. To begin, it is foolish to believe that banks are going to decline in sheer size in the modern world. Then again, as he rightly points out, a Chairman's real responsibilities are calling meetings of the board and presiding over them. A Chairman is merely one person on, in J.P. Morgan's case, an 11 member board. So too are there studies pointing out that where there is a strong, independent board...also mostly the case at J.P. Morgan...it is unclear what the separation will actually accomplish He concludes, and I think correctly that this is really all about the concern for the :too big to fail" syndrome on the part of certain shareholders and as an attempt to send a message to Jaime who, even his closest supporters will admit, is a long way from being Mr. Cuddly all the time.
Fair dos, but this seems like a hell of an expensive way to make that point, and while I agree with the main thrust of Prof. Steve's piece, there is one piece of factual evidence that I think he has overlooked and that is of course the happenings at Citigroup.
I have throughout my life become more and more of a believer that it is not the structure that enables success but the people within the structure. Citigroup instituted a split chairman/CEO structure right after the crisis simply because the guy who had both jobs wasn't a schmoozer which was desperately needed inasmuch as the government was the owner of the institution and schmooze is what the government is about. Problem was, of course, the schmoozer wasn't within a Stone's throw of being a banker and while surviving, the institution wasn't moving forward. Enter Michael O'Neill as chairman, and while calling meetings and presiding over the same he set agendas and the first on THAT list was the removal of the CEO. Forget about the stock price which has risen 50% in the last six months, Citibank, whilst continuing to have multiple problems, is well on its way to becoming the leading banking institution in the U.S. It's all about focus and that is what a tough, independent chairman can bring when the CEO has the wrong idea or as was the case, apparently none at all. Boards do not bring that, individuals do, but of course it must be the right individual and in that all important role of corporate governance, I come down on the side of two heads are better than one.
Funny, but if you want to see another example of this in a banking environment, take a look at Standard Chartered about 15 years ago. Same actions, same result. Look, there is no doubt Diamon is a hell of a CEO and for the most part, with a bit of luck, he has done a fine job. But frankly, no form of organization was going to prevent the London Whale from spouting foul deeds. It is the people, always the people, and from time to time they get complacent and examples must be and have been made. Of course, it might be helpful to have an independent and permanent organization structured around the CEO's office which, when required, would have the sole duty of saying, "Jamie, PLEASE SHUT UP!"
We are off to the East Coast for the wedding of one of my former students. It's always really gratifying when something like that happens as it makes you believe that perhaps you've done good in some person's life. I'll have the IPad along for the next week, so keep looking. And thanks Carter for your insight into politics and Co-Op bank which I hope can be discussed next week.
Cheers!
Showing posts with label O'Neill. Show all posts
Showing posts with label O'Neill. Show all posts
Thursday, May 16, 2013
Wednesday, October 17, 2012
I THINK I GOT IT RIGHT
Certainly, there was nothing reported today to make me think otherwise. What I still can't figure out is why the popular press and the talking heads got caught by surprise when about 5 minutes of thought would have identified the scenario. Despite what others would have you believe, banking is about people...just like most events in the world. Why would a very wealthy guy (an assumption) agree to the Chairmanship of Citigroup having been called out of retirement without the thought that he was planning to make it into his own image? To fail in the attempt? And why did no one investigate his background and past actions and not come to the conclusion that it was altogether likely that the course being steered by the bank's then-present management was about to change? I am constantly surprised by the lack of acumen demonstrated by those who present themselves as experts in the world of finance. It's about the people folks; it's always about the people. Know them first and then look at the numbers. And in that vein, watch to see if the new management is successful in retaining the key people needed to make this change in direction work. I'm betting that it will and frankly that will be good for the industry. Maybe with the success of Citi the rest of the industry will "'stop doing the stupid things" as Mr. O'Neill is fond of saying.
The cops and the Feds in New York today announced the arrest of some guy for Bangladesh who was planning on blowing up the New York Fed in a sting operation undertaken by the NYPD. Idiot. All he had to do was watch Ben and his boys do the job for him over the next few months with the enthusiastic support of Billy the Dud on Liberty Street. CPI was up 0.6% last month, the second consecutive such monthly rise. That puts consumer costs in the 10%+ annual range which is beginning to look a lot like Argentina. Ah, you say, but the core rate is only 0.1%, and to that I reply an old guy like me on a fixed income says, "Core, schmore. I gotta eat." What the policies of this central bank have done to the elderly in this country is surely a crime. O'Neill for Fed Chairman? A "stop doing the stupid things" monetary policy? Not a bad idea.
Meanwhile, across the pond, the big shot two day event starts tomorrow, and Frankie H. has already announced that it will ratify all that has been agreed on the bonding of Euroland over the summer and plan the implementation of the same by year end. Forgive me, but I seemed to have missed part of that and are therefore in no position to comment. What will probably occur is Greece getting a few more Euros to get them into next year, Spain will jaw-bone on what they will NOT have to do to get a bail-out and Angie will continue to talk nice-nice and say nothing allowing the ECB to set the agenda. Kinda like "leading from behind?" In advance of the pow-wow, market commentators have waxed poetic at the decline of bond yields across the southern tier. Nothing like a put to the ECB to put steel in the spines of investors. I'm beginning to wonder: is the Citigroup affair the last thing I will ever get right? I think I'm going to head out and buy a bottle of whiskey on such a scary thought. By the by, is whiskey part of the CPI or part of the core? Anyone have the answer?
The cops and the Feds in New York today announced the arrest of some guy for Bangladesh who was planning on blowing up the New York Fed in a sting operation undertaken by the NYPD. Idiot. All he had to do was watch Ben and his boys do the job for him over the next few months with the enthusiastic support of Billy the Dud on Liberty Street. CPI was up 0.6% last month, the second consecutive such monthly rise. That puts consumer costs in the 10%+ annual range which is beginning to look a lot like Argentina. Ah, you say, but the core rate is only 0.1%, and to that I reply an old guy like me on a fixed income says, "Core, schmore. I gotta eat." What the policies of this central bank have done to the elderly in this country is surely a crime. O'Neill for Fed Chairman? A "stop doing the stupid things" monetary policy? Not a bad idea.
Meanwhile, across the pond, the big shot two day event starts tomorrow, and Frankie H. has already announced that it will ratify all that has been agreed on the bonding of Euroland over the summer and plan the implementation of the same by year end. Forgive me, but I seemed to have missed part of that and are therefore in no position to comment. What will probably occur is Greece getting a few more Euros to get them into next year, Spain will jaw-bone on what they will NOT have to do to get a bail-out and Angie will continue to talk nice-nice and say nothing allowing the ECB to set the agenda. Kinda like "leading from behind?" In advance of the pow-wow, market commentators have waxed poetic at the decline of bond yields across the southern tier. Nothing like a put to the ECB to put steel in the spines of investors. I'm beginning to wonder: is the Citigroup affair the last thing I will ever get right? I think I'm going to head out and buy a bottle of whiskey on such a scary thought. By the by, is whiskey part of the CPI or part of the core? Anyone have the answer?
Tuesday, October 16, 2012
ONE TOUGH IRISHMAN
Mike O'Neill. former EVP of Continental Illinois, Former EVP for finance of Bank of America, former CEO of Bank of Hawaii and (briefly) Barclays, now Chairman of Citigroup, expert in Grand Masters and fixer of banks who begins with the simple credo, "Stop doing the stupid things." Oh yeah, and about as tough and straight an Irishman as you will ever meet.
The only story today is the change of management at Citigroup. Vikrim Pandit resigned unexpectedly this morning (the understatement of the year) to be replaced by Michael Corbat, a long-time Citi veteran. 90% of the talking heads are speculating as to why and how this happened, not to mention the timing which was just after the release of 3rd quarter numbers which, if one could decipher them looked exceptionally good. /////////////// Took a short break to listen into the analysts call, and both O'Neill and Corbat emphasized that there was nothing more to Pandit's resignation that his feeling that the time had come. I suspect that that is correct but I'm also pretty sure that there was general agreement among the board as to that point after a considerable period of discussion (months not days) that was not particularly a secret if some of the talking heads had expressed any interest.
O'Neill was among a new group of directors elected about three years ago, and the common theme was that their backgrounds were far more in commercial banking than was Mr Pandit's. When O'Neill was elected Chairman to succeed Richard Parsons, a schmoozer at best and a disaster at worst, the writing was pretty much on the wall as to the strategic choices which loomed before the board and most importantly, who would be best qualified to execute the direction and course the institution would take over the coming years. Frankly, I never thought that between O'Neill and Pandit, if it came to it, that who would win nor am I the least bit surprised as to the election of Corbat. In the past few years the most impressive exercise throughout the entire organization was the ridding of over $650 billion in non-core assets, (read, "crap") transforming a massively under capitalized institution into one of the strongest, from a capital standpoint, in the country. O'Neill was the director charged with the oversight in that process and Corbat was his guy. It gets you noticed. Moreover, Corbat has had broad experience in the commercial side of the bank, both domestically and internationally, which is clearly the strategic direction the bank has chosen. Not surprisingly, this experience mirrors O'Neill's precisely. As I have said in past pieces that I am sure you remember reading, Citi is the only truly international bank we have and it is there I suspect, on the commercial side that it's future success is to be found.
None of this is to say that Vikrim Pandit was a bad guy or a bad CEO. He is just not the CEO for this point in time for one of the great financial institutions in history. In addition, he is too linked to the past calamities, whether fairly or not, to have remained effective. But make no mistake, this was a board room coup; a gentle one perhaps but one none-the-less organized by one tough Irishman. I think I might buy a few shares.
The only story today is the change of management at Citigroup. Vikrim Pandit resigned unexpectedly this morning (the understatement of the year) to be replaced by Michael Corbat, a long-time Citi veteran. 90% of the talking heads are speculating as to why and how this happened, not to mention the timing which was just after the release of 3rd quarter numbers which, if one could decipher them looked exceptionally good. /////////////// Took a short break to listen into the analysts call, and both O'Neill and Corbat emphasized that there was nothing more to Pandit's resignation that his feeling that the time had come. I suspect that that is correct but I'm also pretty sure that there was general agreement among the board as to that point after a considerable period of discussion (months not days) that was not particularly a secret if some of the talking heads had expressed any interest.
O'Neill was among a new group of directors elected about three years ago, and the common theme was that their backgrounds were far more in commercial banking than was Mr Pandit's. When O'Neill was elected Chairman to succeed Richard Parsons, a schmoozer at best and a disaster at worst, the writing was pretty much on the wall as to the strategic choices which loomed before the board and most importantly, who would be best qualified to execute the direction and course the institution would take over the coming years. Frankly, I never thought that between O'Neill and Pandit, if it came to it, that who would win nor am I the least bit surprised as to the election of Corbat. In the past few years the most impressive exercise throughout the entire organization was the ridding of over $650 billion in non-core assets, (read, "crap") transforming a massively under capitalized institution into one of the strongest, from a capital standpoint, in the country. O'Neill was the director charged with the oversight in that process and Corbat was his guy. It gets you noticed. Moreover, Corbat has had broad experience in the commercial side of the bank, both domestically and internationally, which is clearly the strategic direction the bank has chosen. Not surprisingly, this experience mirrors O'Neill's precisely. As I have said in past pieces that I am sure you remember reading, Citi is the only truly international bank we have and it is there I suspect, on the commercial side that it's future success is to be found.
None of this is to say that Vikrim Pandit was a bad guy or a bad CEO. He is just not the CEO for this point in time for one of the great financial institutions in history. In addition, he is too linked to the past calamities, whether fairly or not, to have remained effective. But make no mistake, this was a board room coup; a gentle one perhaps but one none-the-less organized by one tough Irishman. I think I might buy a few shares.
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