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November 05, 2007 at 07:00 PM
Citigroup Chairman and CEO Charles Prince has “elected to retire,” according to a November 4 announcement, with no permanent successor in place. Prince is the latest Wall Street chairman to fall victim to the subprime and credit woes that have embroiled the markets in the second half of 2007, and his retirement comes less than a week after Merrill Lynch’s chairman and CEO, Stan O’Neal, decided to immediately “retire” from his posts without naming a permanent successor, following Merrill’s $7.9 billion write-down on its third-quarter earnings.
In a separate announcement on November 4, Citigroup acknowledged “significant declines since September 30, 2007 in the fair value of the approximately $55 billion in U.S. subprime related direct exposures in its Securities and Banking (S&B) business,” and currently is projecting an $8 billion to $11 billion write-down from that exposure.
Citigroup is one of three principal banks, with JPMorgan Chase and Bank of America, to lead a Federal Reserve-supported fund designed to help bail out Structured Investment Vehicles (SIVs). SIVs are essentially holding vehicles for mortgage and other structured securities that fund themselves in the commercial paper markets but face a big problem as their current commercial paper matures: Institutional buyers have balked about buying new commercial paper backed by the SIVs, and as a bulge of SIV commercial paper matures over the next few months, some SIVs may have to sell already depressed long-term securities to pay off the short-term debt that is maturing. Citigroup is reported to manage about $80 billion in SIVs, according to Reuters.
