Jane Fraser, who replaced Michael Corbat as CEO of Citigroup in March of 2021, follows a line of CEOs who have each tried unsuccessfully to change Citigroup’s culture and the resulting ongoing problems with risk compliance and internal controls.
Since the year 2000, Citigroup and its subsidiaries have paid over $26.9 billion in federal, state, and local government penalties related to investor protection, toxic securities, mortgages, and many other regulatory issues. The list of infractions includes misleading customers in the selling of auction rate securities, fraudulent securitization of mortgage securities, mortgage loan servicing and foreclosure abuses, and price fixing and anti-competitive practices.
More recent examples include the 2020 Federal Reserve and OCC fines of $400 million for repeatedly failing to meet the requirements of multiple consent orders. This means that Citigroup repeatedly did not take actions required by the regulators to address long-standing serious deficiencies in risk management, compliance, data governance, and internal controls.
The 2022 fines of over $200 million by the SEC and CFTC were for many widespread and longstanding violations of recordkeeping provisions required by securities law.
These are only the problems that came to light. I have given nationally televised testimony to the Financial Crisis Inquiry Commission about the compliance breakdowns that I personally witnessed while at Citigroup and have also written about many of the failed attempts of Michael Corbat and the previous CEOs to address the ongoing issues (see Who’s Trying Now To Save Citigroup’s Soul). These issues point to a longstanding cultural problem within Citigroup. From managerial greed fed by a faulty bonus structure to an egregious lack of oversight, nothing has stopped the bad actors from acting badly. So what does Fraser bring to the company?
To emphasize her seriousness in finally achieving the goal of changing Citigroup, Fraser recently announced a massive corporate reorganization, including the elimination of several layers of management and 20,000 employees, or 10% of the company’s global workforce! The layoff reserves and related charges resulted in a Citigroup 2023 4th quarter loss of $1.8 billion.
Investors are enthusiastic that Fraser will be successful in finally changing Citigroup’s culture, with the Citigroup stock price increasing 35% in the last three months. Before this increase analysis shows the price of Citigroup stock has dropped 92% since January of 2007.
For the sake of our country, we all need to hope Jane Fraser succeeds!
Richard Bowen is widely known as the Citigroup whistleblower. As Business Chief Underwriter for Citigroup during the housing bubble financial crisis meltdown, he repeatedly warned Citi executive management and the board about fraudulent behavior within the organization. The company certified poor mortgages as quality mortgages and sold them to Fannie Mae, Freddie Mac and other investors.
