Decline and fall

As the talks continue about the Citi situation, several pundits already seem to be getting the draft obituaries out there. I think the funeral arrangements are premature, but they don't seem to have any options left to them apart from either a radical restructuring or a government rescue (or maybe both).

Having dealt with Citi several times in a transaction mode, I've always been struck by their particular way of deal making. Their pitches were generally very slick, and they were never short of foot soldiers to deploy. The problem was always one of substance and quality control. Relatively flimsy modelling was a regular occurrence, as was a tendency of brush aside the risk of "off-the-wall" responses from the opposition. The result being that we always seemed two steps behind on every deal...

Yet the deadliest sin was, in my view, their sense of manifest destiny. They equated their size and past successes as natural, and assumed the music would keep playing. That arrogance is common to all Wall Street firms, but in the case of Citi meant they were in denial about the limits of their organisation. Citi's "integrated business model" is actually a car crash of distinct (and often warring) franchises - the only integration is in the marketing literature.

While Citi struggles on its knees, the government might want to reflect on how much rope they might give them, given that the demons assaulting them are largely of their own design.