This week, I started working with AOL Money & Finance writing on two of their sites – DailyFinance and BloggingStocks. I’m looking forward to working with the talented and enthusiastic team there to produce great content, and to take advantage of the opportunities that the backing of a large platform offers.

A recent article on the increasing public pressure on Citigroup (C) CEO Vikram Pandit grew out of a conversation I had with Tom Brown, whom I’m greatly indebted to for the perspectives he has given me across a number of areas. Pandit, he said, would be the only large bank CEO replaced this year – this was shortly before the news broke about how heavily the Fed and Treasury leaned on Bank of America’s (BAC) Ken Lewis to save Merrill Lynch. In a small bit of irony, I found an article written by Tom Brown in 2005 urging the break-up of Citigroup via a note in BusinessWeek Online written by Amey Stone; Amey is now my boss.

After talking with Tom, I ended up speaking with Vernon W. Hill, who founded Commerce Bancorp – a bank I’m very familiar with, as it’s based just miles away from my home in southern New Jersey. Hill built Commerce into a bank with more than 400 branches, and the company was eventually purchased by TD Bank (TD) for $8.5 billion (by comparison, Citi’s current market cap is $19.2 billion). He has been a long-time critic of Citigroup’s management, although he was encouraged by four outsiders with substantial banking experience being added to the company’s board. One other thing that Vernon Hill said stuck in my mind, though:

“Normally when you fail, things change… Every time there’s an economic problem in the world, going back to the third-world debt crisis, Citibank is on the verge of going broke.”

That same day, Jim Grant of Grant’s Interest Rate Observer was on CNBC, lending some desperately needed deep thought to the typical banter. Grant, in the video segment embedded at the bottom of this article, brought up Citigroup and said almost exactly the same thing.

“The Fed is undercapitalized in the way that Citicorp is undercapitalized… Citibank is a rogue bank. It has been on the verge [of failure] in every credit cycle going back at least to 1988… Oh, by the way, it goes back to the LDC crisis of the 70’s”

Brown, Hill, and Grant are extremely knowledgeable voices about the financial business; their sentiments align with an editorial entitled “Making Failure an Option” in the Wall Street Journal, which noted:

Citi has proven itself unmanageable by having already failed three times since the 1980s, requiring government bailouts in one form or another during the sovereign debt crisis in the ’80s, the 1990s real-estate bust and again, twice, during the panic of 2008. Its turnaround plan has also been less than impressively executed.

The definition of insanity, it is often said, is doing the same thing over and over and expecting different results. Perversely, however, Citi has actually used the repeated hand up (or hand out, depending on your perspective) from the government to become larger and more complex over time.

Credibility is the currency of a financial institution, and right now I don’t see how Citi has any. That is not meant as a condemnation, but a simple observation – people more intelligent than I am feel that the company is adhering to a broken business model. More importantly, however, there seems to be no indication that things are set to change. I’ll stop here and put this back to Citigroup: if you can communicate some idea of how you create additional value in your present form, please, do so. People are listening, and right now what they’re not hearing much to help your case.

Subscribe to our feed using your favorite service: