Citibank CEO Michael Corbat’s Completely Out of Touch Speech at Omaha’s Chamber of Commerce
Or, where one of the largest banks in the world constructs an alternate reality in which they display just how far from the needs of the consumer and the country their interests have strayed.
Your first question might just be to ask, why is the CEO of Citi making a speech to the Chamber of Commerce of Omaha Nebraska? After all, the Chamber of Commerce of most cities is little more than a group of local businessmen such as car dealers, farmers, the odd furniture store owner or “mattress king”. Omaha is a little different. The board of the CoC for the Greater Omaha area includes representatives from ConArgra foods, Mutual of Omaha Insurance and a dozen other household names. As Corbat mentions early in his talk Omaha is home to a, “who’s-who of Nebraska’s corporate stalwarts, including Union Pacific, Berkshire Hathaway, TD Ameritrade, and Tenaska.”
In a nod to how out of touch this speech is from reality, Corbat inexplicably quotes the laughingly poor work of Harvard historian Niall Ferguson. Eviscerated for simple and avoidable analytical errors in his time on stage, Ferguson is now silent as America enjoys an unprecedented economic recovery that he preached would never occur.
Corbat begins by lauding the work of Citi’s private banking office in Omaha. Private banking, if you are not familiar, is what our parents and grandparents often called “banking”. You meet a person who works for the bank, shook their hand, and are reassured that they have years of education and experience to guide them in their advice on how to manage you assets. Generally speaking, to be a Citi private bank client you must have about $25 million in assets, so unless you are well off you aren’t going to be getting this level of service from Citi or any other major bank.
Corbat then notes that banks are still regarded with suspicion and admits that at least a part of it is well deserved. It is for this reason, he notes, that he has traveled so far to talk to “Main Street”. This reasons is to stress that there is very little space between the needs of the main street business owners of Omaha (Berkshire Hathaway, ConAgra Foods, Etc) and Citibank et al. Yes, you heard that right, Citibank considers some of the largest firms in the world, firms that dwarf most of their competition as the “Main Street” of American business.
Corbat next begins to weave an alternate reality to the recent past, recasting the Citi struggles to escape responsibility for their part in the housing crash as how they have,
“…shed more than $700 billion in non-core assets and 60 non-core businesses around the world. We no longer have insurance businesses, hedge funds, private equity funds and we aren’t an asset manager.
We have completely rebuilt our capital base and liquidity — not just back to, but far above, pre-crisis levels. We’ve also lowered our leverage by more than half and overhauled our risk management.”
In the real world, Citi fought tooth and nail against the capital requirements imposed on them and failed the Fed’s stress testing not once but twice. Their plan for capital reserves was rejected as inadequate. Meanwhile they shed businesses that they were required to invest their own money in by a law they bitterly opposed, Dodd-Frank, or which were huge money losers.
In fact, at the same time as Corbat is bragging about the solid footing that Citi is now on, their own legislative language tucked into a recent spending bill has weakened such footing.
“As an industry and as a company, we’ve taken responsibility for our actions”, Corbat remarked.
Really? I don’t recall a “we are sorry and will stop being shady” advertising campaign. In fact, in their mortgage business they continue to shield brokers that they buy loans from from disclosing details of those loans. In the words of one Citi analyst, they don’t want to be held accountable if some of those brokers are illegally targeting minorities or other protected classes of borrower for higher cost loans.
This is not “taking responsibility”, its ducking it.