tv Squawk on the Street CNBC October 16, 2012 9:00am-12:00pm EDT
reports suggested thus far. they always had a contentious relationship but in the past three months it's gotten worse. one last point to make is pandit was in tokyo this weekend with michael corbat at the imf meetings and at a reception and a couple of people noticed this and said to it me that corbat actually stood in the receiving line with pandit and a number of people said isn't that odd? so a couple of different facts to put together, obviously. >> thanks, andrew. we'll see you tomorrow. david walker we got to go. >> bottom line, economy, jobs, fiscal responsibility. we need substance and solutions to avoid the cliff and abyss, both. >> david, thank you. >> join us tomorrow. "squawk on the street" with more on this pandit news is up next. as you've been listening stunner at citigroup. vikram pandit stepping down as the banking giant ceo. good morning. welcome to "squawk on the street".
i'm carl quintanilla with melissa lee, jim cramer. pandit is resigning effective immediately. he's being succeeded by michael corbat who previously served as citigroup of europe. the changes come one day after citi's earnings beat expectation in a conference call which, of course, jim said absolutely nothing about this. >> no. this was the first quarter that was the break out quarter for international. first time that i felt that the company had put a lot of its problems behind it. best knit interest margin. we only had a couple of banks report. people are trying to present this this was logical, this was in the works. this was the least logical, least in the works. corbat terrific. he ran holdings. 48 hours did we know this? i don't know. i got to tell you that the people that i talked to at citi, to say not in the works is being
underplayed. >> there's shock at least among a handful of people who i talk to regularly at senior who are senior but no way aware of this. they are shocked. they heard it about an hour prior to the announcement being put out there. and, you know, it seems as though we don't know at this point, although we listen eed t andrew ross sorkin's report right now. there was some contention between board particularly new chairman o'neal and mr. pandit. one never knows. sometimes those relationships can blow up in one big argument where you get threats. who knows. we don't know. we won't know. what appears clear this was sudden, unexpected, this was highly likely to have been involuntary. >> that is one theory. but it's only a theory. there are other theories that this was a dispute over compensation. we should point out the coo is
leaving. when the ceo and coo tend to leave together that is not generally seen as good. >> hey convenience and pandit have been there together for quite some time. hey convenience ran investment banking, ceo subsequent to that, a lot of people loyal to havens. no surprise he would leave with pandit. >> do you think it's possible the board took a hard line on something and pandit said i'm out of here. >> yaep. absolutely. >> i don't know what it was but it's possible. >> i've been in meetings with o'neal and pandit, but things have a habit of not -- a meeting 18 months ago doesn't mean now. >> vikram pandit can be a low key guy. but knowing a lot of people who have known him for quite some time he's a tough guy. >> have you heard anything about compensation? we that high-profile shareholder vote in the spring where they rejected a pay package.
vikram pandit accepted $1 in pay since 2008 since that huge $33 million pay package. i'll take $1 a year until the bank returns to profitable. yesterday they posted a blow-out radiator. the stock saw a gain. board had to take a hard line because of that and pan at any time said you know what? i'm out of here. >> pandit did enjoy the challenge. no one wants to be slapped down by shareholders. in conversations i've had, this was i'm going to show them, i'm going to deliver, this was the delivered quarter which is why such a stunner. would you have expected this if the quarter was a terrible quarter. and the company has had terrible quarters. this was not one of them. i know corbat ran citi holdings and they said in the conference call they won't dump that. it's below 10%. obviously somewhat successful story. i've been trying to get them to get out of citi holdings
earlier. this was to the highest level i've talked to not thought was going to happen even a week ago. >> it's important to point out he was not the chair of the board, right? >> right. >> one card he did not have to play. when you add up brownstein at jpmorgan now pandit. people will ask whether something nefarious is at work at large in banking right now. >> i accepted genuine rasmussen and loved it at goldman. there was a spree every where on wall street. when you talk with people off the desk at these firms, they don't -- i'm not giving you some kind of -- i don't want to give you some sense of a crisis. people don't like working at these places.
>> we talked about that. our heart bleed for them all. >> you know what i mean. >> it's an interesting question. my sense is they are not related. the ceo of jpmorgan certain issues he took into account in term of what he's wanted to do for his future. here you have a ceo which is also different. >> it was sudden. >> i heard somebody saying it's like the 1980s in some way. >> pandit loved this job pep loved this job. >> did he feel he wasn't getting paid enough to do it? >> really referred to the fact it was hardship to make a dollar. >> he made a great deal of money when he originally came to citi. they bought his hedge funds for an enormous amount of money. >> you don't want to say the guy was loaded but these people are not hurting. when you see the firms not taking money or whatever, the
municipal bond portfolios for these people are so gigantic. these are people who know you only need to get rich once. they own a big part of the chicago, you know -- those were downgraded, new jersey turnpike bonds. just a tremendous amount of wealth at the top of these banks. >> let me ask you this, if you're a shareholder at citigroup this morning do you feel that you were cheated because there was no indication this was going to happen. yesterday was a great day for citi. today we got dropped a bombshell. or would you be happy because 55% of shareholders voted no on that pay question. >> $37.18 when this came out. i saw a little trade. you had a sense maybe the book value was real. net interest margin call you talked about yesterday in mexico. great quote. these are things that pandit, those are his initiatives. look, can i just throw my hand
up and say this is a real stunner. this is true drama. >> he don't see it. the story itself will have some real drama as well once we find out what really happened. >> there was a tremendous antipathy. geithner did not. my understanding is during the crisis geithner wanted city group to merge with wachovia to create a stronger bank. wells ended up with wachovia. there was a lot of tension. what i thought was so significant it was over. now goldman, it was over. they got through the crises. citi had put -- >> listen, we'll hear lots of spec and i'll start speculating. there's been talk, libor investigation. i've been getting a lot of questions about that. it's a fair point at least. have no idea whether there's anything. my sense is probably not.
you don't know. again, to come back to the big things. usually you leave at the end. year if you would do it. you have some sort of transition. no doubt this was forced in some way. they failed the stress test. had the vote against this com. and morgan smith stanley barney wasn't a great deal. >> in order to get rid of us -- >> where is the government now? i'm confused on that. you guys are -- >> think the government is playing role. >> t.a.r.p. is out. >> bottom line on the share performance basis, since he took office december 11 of 2007, split adjusted, stock is down 89%. his tenure has not been kind. >> what's the comparison versus the benchmark. >> it's one of the worst. >> aig, the larger financials and then citi.
>> they are a different story. >> no longer largely owned by the government. aig is the analog they had government intervention. >> they say he's not doing exchanges. >> "mad money" and he's a stand up guy and there the book value success realized. again, i just can't stress that this is not -- i mean all the ve verbiage this is the right time. this is the wrong time. >> especially after the journal did a piece a few weeks ago august 2nd in which they said pandit was working on his succession planning and his bonuses were tied to that. >> $10 million in stock which will be vested to him over three years. >> he planned to stay several horse years. >> he's a young guy. 55 years old. it is young. don't you give me age
discrimination. i saw that look. >> i was thinking that's very young. >> corbat was named as the lead potential successor in that article. not like he was completely out of the blue. we may not be familiar with him but he was named along with two others. >> harvard class of '83. one time nfl prospect might have played. i don't think he ever did. some of the reports said he was highly sought after by the ladies. do you know him? >> wow. that's great insight. >> this literally has been the talk of the town. >> this is a phillip rivers moment for pandit. second half not so hot. >> 35 unanswered points. >> man. i do, again, those of us who are trying to make our calls behind-the-scenes you're getting a total brick wall. when you ask a question of when t did this happen, we're not going tell you. if it was smooth you say it's
been in the works. they are not giving you it's been in the works. >> no way. somebody will get there. good story too. >> very big. >> very big. >> definitely involve screaming, i have no doubt. we got to talk about some of the other news. continued coverage of this story this morning but goldman sachs reporting third quarter earnings. revenues beat expectations. goldman raising its quarterly dividend up. this is the second time this year that goldman has raised its dividend. also buying back more stock. it's about 34.2 million left in its buy back program. vinair said we're responding because this is what investors wanted. >> goldman has been very low and they did the buy back for a long time. when things got ugly under 100 they weren't buying back stock and then in that interview with
liesman he talked positive. this is a good quarter. good quarter. doesn't seem as good as citi's quarter but then, again -- >> it was a good quarter. >> surprised to see the stock initially dip down because this was to me a major surprise. book value don't build. there's a gigantic position. maybe it's starting to return to shareholders. interesting that fellow who wrote the book will be on "60 minutes". it's a schizophrenic time for goldman. >> comp by the way, average comp back to 440 k. >> expenses were high. >> 44% in terms of the comp revenue rate. which is higher. >> higher. >> remember they can do a lot to adjust that in the fourth quarter. that becomes the key quarter. they can withhold and then it
brings it down. >> if i recall, you know, they've been closer to 37 under 40 certainly for the last couple of years in terms of revenue. >> thick revenue, troublesome or not? no idea? >> no, i don't think it is. i don't know. you know what, this was in my wheelhouse and we learned that vikram pandit -- >> everybody was getting up to speed on these earnings. we had five of them. ibm tonight. now kaboom. >> we were going over line by line on citi. i said wow every single line item. what was so funny they pointed out that mortgages weren't that good. everyone else is saying mortgages were great. they have not released a lot of their mortgage reserve. they had an understated quarter versus the other guy. so, again, i come back and expected to see a number of
upgrade today. i expected to see a lot of people fawning over citi. >> we had one upgrade. at threat of release from goldman, generally solid in the context much what he's calling a still challenging economic environment. we'll get to rick santelli, industrial production, rick is at the cme group. good morning. >> good morning. yes, we have industrial production up .4. close to double expectations. however those extra two tents and last moved fry minus 1.2 to minus 1.4. yfization spot on with expectations but we lost two tenths from 87.2 to 87.0. these numbers are good but what we're looking at in the rear view mirror takes it away. rates popped up today but didn't pop. on any current stories. they popped up on the news that
hit on the spanish credit banking line or that notion put risk a little bit on the moderate side as we saw boom and treasury rates move up a little bit. carl, back to you. >> one story we should have mentioned we'll talk more about that esm credit line. vikram pandit is stepping down from citi group. as you saw, mildly positive here. pandit already gone from the citi website. "squawk on the street" back in a moment. tdd#: 1-800-345-2550 when i'm trading, i'm totally focused.
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welcome back to "squawk on the street". if you're just joining us a bombshell of an announcement coming out of citigroup this morning. vikram pandit steps down as a member of the board. mike corbat is the new ceo over at citi. we're watching the stock trade lower in the pre-market session on pretty heavy volume down 1.3%. so in that context not such a bad pull back on shares of citi but still shocking announcement for people waking up this morning. >> shocking particularly because and the reason why the stock is
not down that much there's a lot in the quarter that gave it some momentum. just don't know what happened here. >> we're, of course, continue following the story. in the meantime there's a lot of earnings. we're at the start of earnings season. coca-cola coming out matches on the eps. a little bit light on the revenue. the upside and jim you've been pointing this out, forex wasn't as bad. >> it rose year-over-year. north america rose 2%. that was interesting. what's noteworthy here india up 34%. russia up 18%. brazil, mexico. there's worldwide volume up. a lot to like. people traded off the revenues. this is a big global company
that has a lot of translations. >> they've been able to show some decent growth in developed markets and then torrid growth in some of the emerging markets which is awfully tough to do. we'll see. we'll see if ibm does something similar tonight. all those who have concerns about earnings say if ibm shows any signs of weakness you'll wonder how much pain the rivals are going through. >> johnson & johnson. these companies are executing very well. >> here's ben ringing the bell for aig. the company say they are in a quiet period. not doing any press. we'll do our best to change that. nothing like being booked on live television. we'll work on that. >> he's had a great quarter. doing really well. hey i gotcha. to say the quarter was good. meaning for people at home this is when the government owned let him talk but there were a lot of
things you could talk about the actual earnings. no one wants to be in a situation where we're hounding him to find out number. this is a remarkable transformation. the government has been steadily when itli been whittling down. >> coming up next we'll have much more on vikram pan department's resignation including reaction from a toni sacconaghi's board member. and cramer's mad dash. i'll have the opening bell. take a look at the futures one last time. we're looking at 59 points at the open. "squawk on the street" is straight ahead. i'm a conservative investor. i invest in what i know. i turned 65 last week. i'm getting married. planning a life. there are risks, sure. but, there's no reward without it. i want to be prepared for the long haul. i see a world bursting with opportunities. india, china, brazil, ishares, small-caps, large-caps, ishares. industrials. low cost. every dollar counts.
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time for the mad dash. let's check in with jim a few moments before the opening bell. people trying to digest the sprint news and what the future is for clearwater. up have some thoughts. >> i think the company is trying really hard to get people to back away from the idea that sprint will take that money and buy a lot of clearwire. sprint wants to take the money they are taking from soft bank and catch up in long term evolution to its rivals verizon and at&t. verizon wireless has pulled ahead of what was needed to be able to go 4g even though sprint has done a remarkable job of getting customers from nextel and i think that money is going to technology. clearwire has been up day after day after day. maybe one day they do clearwire but not with the common stock.
david has been saying, trying to figure out too what's going on. but i would say the clearwire bloom is off the rose. >> you don't think it's possible they are trying to tap down the price and keep it in a reasonable range. >> the study of citigroup -- >> we're woozy. >> dan hasn't been focused on this. this deal happened very fast. ing the ceo of sprint. i think literally they are trying to figure out where should we put that money. what's the best place to do it. i think it will be in technology to be able not to leap growing because toth and verizon are so strong but catch up. that was the big issue. you had to convert nextel and spend a lot of money. suddenly that issue is gone. why would you start buying clearwire. clearwire is losing y.it's bett don't do it. >> compelling theory. when we come back, as you know by now, vikram pandit stepping down from citi. now it's the markets turn to
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not too often you get days like this. huge stunning news over at citi and then benmosche on the balcony here at the big board today. insurance company aig celebrating its new logo. they got rid of the red, going with this tiffany blue. you can see the logos all over the floor. we got some hats here at the desk. nasdaq, maxwell technology, manufacturer of energy storage products. we're going start this day obviously by zeroing in on the letter c, jim, which you think will hold up given the magnitude of the surprise. >> remarkable turn in the stock. pre-market session on news of the resignation was down by as
much as 2.5%. as volume picked up as the story got digested it's down just by a quarter of a percent. >> this is why we're all so shocked. i've been following bank stocks for a year. you get a quarter that's so break out. so clear that the company is going to be the emerging market bank. finally got it right, pandit and he's out. and i have yet to find anyone, anyone who expected this. anyone. not a single person. >> i haven't either. i have yet to find anybody. i've been trying. making calls at this point. the best we can do is come down to what may have been a more contentious relationship between the chairman and ceo. mr. o'neal, the chairman of citi only came in last april. perhaps difference in strategy. but that's speculation at this point. very odd.
the whole timing, the designates by citi not to give us any information. >> the website. >> some people saying yesterday really? you report earnings and you can't give us any sense -- >> talks were happening. this is a material -- >> certainly is material. >> it's material to the thought. >> can't find out whether -- i mean the language i'm getting is look, you didn't know this 48 hours ago. and corbat i think is interim. i think he's just interim. >> you don't think he's there to stay. >> really? >> i do. >> even though he's been named in the succession talks? >> i think corbat did a good job at citi holdings but i don't think that -- let's put it this way. it's so shocking that it's entirely possible that i would have expected some sort of search. i did not think they would -- >> it would really speak poorly
to the board if he is named ceo and then is named interim ceo after that. >> look, he's in. what i'm saying is that -- let me retrack that. what i'm saying is that the idea that this is portrayed as an orderly succession to corbat is not right. maybe he'll be ceo for a long time. but it's just that it was -- there's too much -- they are making it sound like this was in the works the whole time. there's obviously something, whether it's something that happened with the board and a fight korm pen association, but this was not an orderly succession. >> a couple of notes here. we got somebody on who was with corbat in his solomon training class back in 1983, has known corbat for a very long time. we'll talk to him later in the show. we should note even though bob benmosche didn't want to do any
live interviews, bob pisani cornered him and we have a couple comments about vikram pandit's resignation. he kept citing the board as a possible reason. >> keeps coming back to that. >> there's other management news as well. yahoo!'s news. marissa myers but rated her a are -- raided her former boss, google. >> terrific article on the "wall street journal," you have to have mobile, you have to have social, you have to have cl she inherited a company that didn't have representation in any of those. this fellow obviously mobile. google mastered mobile. i continue to like the new yahoo! under her because it's very different from the old yahoo!. google is a pronounced winner and i continue to think she can
turn this company around. >> going to take some time. >> is going to take some time. >> she has a board of directors that include some of those shareholders such as dan lowe an activist in the stock but now a long term investor. >> who wins first, meg or marissa. you covered them both. >> you going to put me on-the-spot like that? >> i'll take marissa because i like the balance sheet. i like a good balance sheet and her blood lines are strictly in the good part of google. >> hewlett-packard involves changing manufacturing operations potentially. much harder business to turn around because you make something. you can't decide tomorrow to make something else. >> one has 320,000 employees the other what is it 18,000. >> yahoo! still has a core residence with people. i felt hewlett-packard is
irrelevant. >> and dow too. >> i do think it's an easier turn because yahoo!'s installed base is in an area of growth the internet and hewlett-packard is in area of the pc. >> citi is positive. >> it is. it was showing signs of reversal early on. >> pandit was -- he -- >> it's on a good track. firmly on the course to bring itself around. >> we had a bit of a bank rally. >> pmc got wells fargo. if you look at the quarter, the problems were the same problems wells fargo had. it slowed this summer. the consumer auto loans, those increased but off set by paid off home loans that you were refinancing. really mixed bag for pmc and that stock is down sharply. 4.25%. >> pmc has executed poorly in this quarter and is creeping up.
wells fargo, i still think you're going to find out that warren buffett is going to stand behind it. you'll find out the actual earnings growth is what they are focused on not interest margin. you could say come on everyone is focused on that. that's a dodge. i continue to like a company that's 40 puerto rico of the servicing market and 30% of the mortgage company in a country where housing is coming back. >> shares of goldman sachs flat down .4% this morning. the company did take issue with my characterization of the comp ratio being higher than it has been. through the wired world that we have. but it was 42.5% last year. then 39 the year prior. 37 or even lower the year prior to that. but it is running more or less where it was running last year. the stock not doing much of anything what appeared to be a
decent quarter. conference call just began about seven minutes ago. >> coca-cola don't like the quarter. they like the j and j quarter. the market making snap judgment after snap judgment. and i've got to tell you that to trade these things without listening to conference calls is a little dicey. very dicey. >> let's check in with bob pisani. he's here on the floor with more. >> mr. robert benmosche ceo of aig rang the bell. he's not giving any interviews. i managed to ask him thinks thoughts on citigroup. we want to show to it in its entirety. i'll run that. called a couple of other people to talk about this this morning. dick bovey sent me a note. i have no idea why pan department is leaving the company. my wild guess is it has something to do with libor. i asked for more clarification. one analyst told me a financial
analyst very involved they didn't think pandit was the guy to take the doe the next level. ate little unusual that it happened one day after the earnings came out. board apparently must have met after not before the earnings call otherwise it should have been in the 10q. david is right and everybody is right on the floor believes there was some kind of disagreement between mr. vikram and the board of directors. mr. vikram lost that. extremely unlikely that someone would walk away from a high paying, high-profile job in the middle of october. the compensation committee doesn't meet until november. so this was done quickly. i would note in terms of wall street voting on this citigroup stock is just down fractionally. while this is surprising and a big issue for most of us the stock is not reacting very much so the street doesn't feel that there's something particularly egregious going on. we have jpmorgan report,
citigroup reporting, goldman sachs reporting and pmc beating estimates. so far the financials have been holding up very well. minor disappointment with wells fargo. we now have the bite with robert benmosche. let's listen in what he has to say about citigroup. >> don't know actually what happened. so i'm as surprised as anybody else. >> can you give us some comment about mr. pandit? did you know him very well? >> i've known vikram. vikram came in at a very difficult time as his team did in the crisis and happy to work through it and got to a point of stability. this may be a sign that he wants to move on and maybe a sign they are ready for the next era of leadership, i don't know. >> i think what everybody is surprised about it happened so suddenly. it was a terrific earnings report. the stock reacted well. then the resignation today. maybe the board meeting was right after that. i want seems a little sudden and we're trying to figure out why it happened. >> to me everything i see as a client of citibank.
they have been terrific for aig. they have been with us all the way through this crisis. they have been a fabulous bank. from everything i see, i can't give you any indication. maybe this is logical transition. maybe the announcement didn't come out right. >> so robert benmosche ceo of aig, talking about the transition and saying citigroup was a good client for aig. that's it from here. over to you. >> look, the idea that it was libor. these make sense to me as something that was sudden. i keep coming back to the suddenness of this. i do not think this was known 48 hours ago. too many high level people i'm talking to are shocked. >> yeah. >> all right. let's shift to bonds and the dollar. rick santelli is at the cme group in chicago. good morning once again. >> good morning. of course the news with citi is
engulfing the trading floor and everybody has their theories, i have to say in chicago the more cynical theories seem to be as mr. benmosche mentioned maybe a libor issue. but there was another issue around 7:30 a.m. eastern this morning, spain considering tapping into eu credit line and of course that makes the safe harbor trades less safe and gave euros a big turbo boost. look at the intraday of the euro currency popped from 1.30 to 1.305. look at bund rates they popped close to 4 to 4.5 basis points. if we want to look at the epicenter, spanish stock market it popped around the same time. it doesn't mean they are is going to ask for it and maybe this is a roundabout way to tap the bailout fund but there's so much anxiety about that, is there enough votes? germany may not go along with the program. very strange situation. very fluid. we can clearly see what the
markets thoughts are on it. for the data today, industrial production, vast utilization looks good. we're still considering the aftermath of yesterday's retail sales. how the iphone and gdp and everything may be affected. for the moment we're moving towards recent top of the range on interest rates but if you take a step back maybe the biggest trade continues to be the mirror image of the euro currency. jim, back to you. >> thanks a lot. let's check out the moves on energy and metals. >> we're looking at gold prices that are stabilizing here. we're a bit higher. more than $25 slide in the previous session pap lot of traders are pointing to the strength in the euro and rick out lined it very well. some reports that germany may be open to spain actually seeking some credit line from the european rescue fund. so that may be helping the euro
and in fact helping gold as well. in terms of the oil pits what traders are focused on is the spread, the premium of brent crude to wti crude. to move to contracts. that blew out to $24. the highest in a year's time. we've seen the brent crude contract coming as the most active there's a lot of talks about specific contracts and the way they are traded as leading to volatility that we've seen over the past 24 hours in oil prices. the intercontinental exchange they have made the transition from clearing energy swaps to futures. some traders say that's added to some price action perhaps we're seeing as these exchanges try to adhere to the dodd-frank act. back to you. >> thank you very much. we're look at stocks that posted earnings or going post earnings. what are your looking to first? >> i got to tell you i'm
impressed with the pharmaceutical industry. abbott, lily, johnson & johnson. it was clean. i got used to being -- he just got in. i got used to having j and j having one times where the number was gone. pharma is in ascendance here. we're not crazy about tech. i continue to believe that pharma is a great place to be given the fact that the dollar is weaker. this is a remarkable rally and does dovetail with the idea that a lot of people think the economy is getting weaker worldwide. place to be. >> coming up next, sheila bair has some thought. and we'll look at this morning's early movers here on wall street.
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. as you know vikram pandit stepping down as ceo of citigroup. >> citigroup under the leadership of vikram is doing very well really. i believe vikram was able to surprise the company and have the company go out of the trouble it was in. they made more than a billion dollars last year. i believe the best days of citigroup are yet to come and the full potential of citigroup in the coming years could come around the $20 billion profit. >> this morning, a few minutes ago, the prince did text our own maria bartiromo, in his words he left citigroup in perfect shape.
>> de. >> which is what you expect the prince to say. he's trying to reiterate, guess what, tap down any speculation that there's something systematically wrong with the bank. >> i guess so. corbat has a good situation going. citi holdings are under 10%. i've watched that bank for a long time, waiting for this particular quarter and we got it. so the one thing that may ring true is did he leave it at a time of where the franchise was good, yes. but the reason why it's good is this team he put together. this team can walk out the door. corbat i'm told a lot of loyalist people like him. this was pandit's turn and i thought -- remember i told you i said he really wanted to show the shareholders listen you made a bad bet when you didn't pay me and this was the beginning of what could have been a couple of good quarters. >> yeah. broadly, jim, dow is up 92. up 95 yesterday. we bounced well off the 50 day moving average which in the past
has been good for a pretty good pop here. you got industrial production beating, confidence, retail sales. what's is going on. even some analysts are having to bring up their pessimistic numbers on third quarter. >> people have to look at what's in the dow. you got a lot of companies that do quite well in this environment. i think pfizer will have a good quarter. merck will have a good quarter. i don't think intel will have a good quarter. verizon and at&t have gotten hit because of sprint. the makeup of it. ge spoke recently and said things are good. you got a lot of stocks that are in a sweet spot, carl. a lot of stocks. >> we'll see if it hold. we avoided the mid-morning fade yesterday. more on vikram pandit's resignation coming up but first -- >> coming up, are you cautiously maneuvering through this market or have you been hitting the
unexpected departure of citi ceo vikram pandit. i can tell you after speaking to a number of senior executives at the firm and people who are close to the firm, this did occur over the last 12 to 24 hours. they tell me which indicates it occurred after the company reported earnings. they had their typical management meeting that they have as well. and in speaking to a variety of people in the senior ranks at citi, every single one of them have said the same thing this came out of the blue. they are as shocked as anybody. the questions now are what other people will leave. havens and pandit have been linked closely but what others will leave. who will be brought in. don callahan. you never cho. again, last 12 to 24 hours what it was about. whether it was o'neal the chairman and pandit arguing about something in particular and it becoming, therefore, clear that company no longer work there, you would never do
it this way even if you disagreed you would say okay we have to part company. let's go year end and start messaging to the market and we'll get it done. you wouldn't do it now. >> we're all making our calls. i was hearing similarly that this was hey guys no, 48 hours ago we didn't know. >> yeah. >> there's a lot of different ways. it was not a quarter that cause this, that's for certain. that was a fwootd quarter. that's obviously why the stock goes up. corbat like god -- this stock is on the move. >> is there a deadline, jim by which you would have had to made this news clear in order for it to be material to this quarter rather than the coming quarter? would there have been a time pressure of any kind? >> there's a blackout. this is involving buying and selling. and there is, typically the window opens in a couple of days. they had to do this before the window opened in order to buy or sell. that could be important.
some people knew he was going to go that's the most material thing in the world. you got to get that out within the window because it's too material and very odd not to open the window after the quarter. so that would have gotten us out. >> bob pisani's message we don't believe the move is related to a smoking gun issue. >> that's what i have. >> i continue to hear that as well. nobody seems to think it has anything to do with libor or anything else that's out there. >> big management dispute. >> sometime it come down to two people who don't get along. that happens. >> i've been there. >> you? >> usually not with the future of the -- >> you expect them to handle it better even if it's hat. >> jim how about tonight? >> i have dominos on tonight. this stock is screaming. who cares. >> nobody cares. this is a citi day. but dominos just reported a
blow-out quarter and i'm thrilled to have them. this is just wow. >> on thursday you're heading out to -- >> to where things are good. i'm going to the oil boom and i look forward to actually seeing where, yes, aubrey mcclendon's first interview. you seem shocked that i have a shocker. >> you told me last week. now i'm remembering. very exciting. >> it is exciting. remember this is where the oil and gas is flowing and chesapeake has the best real estate. >> saw him on the "today show." more on vikram pandit resignation when we return.
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she joins us this morning on the news line. great to have you with us. quite a morning. you say this is actually good for shareholders. why is that? >> well i think it is. i think that the share performance has not been good at citigroup. as i said before, i think there has not been a clear strategic direction and focus. the shareholders themselves are unhappy as you know, 55% voted for mr. pandit not to receive his compensation. so, you know, look. i think if you take what the board said he did a good job as part of the transition they feel, but it's now time for a new chapter and mr. corbat is someone who has had years of experience. the board pretty much knew it was is going replace as a result of the 2008 crisis. they had some experience with mr. corbat now and dealing with him and as they say in their press release he's got good
operational skills, he understands the business lines, he executes well. the main job of the board is to hire the ceo and they are doing their job here and i think it's a good direction, it's a positive direction. >> we should be clear to viewers who may not be aware of this that in your new book, "bull by the horns" you criticize the way in which citigroup was treated by the regulators during the time you were at the fdic. ubld it was favored where it shouldn't have been. you don't think it should have paid the dividends did it. you don't think it should have been painted as a healthy bank. i assume you don't think it should have been bailed out three times. you have skin in the game with this. you have a history here with vikram pandit, don't you? >> well, i do. and as i discussed in my book there were problems with execution at citi. they had problems on executing on the whack acacquisition. they left themselves vul near
scrabble. they had problems even when they came to government and asked for additional bailouts, for instance they wanted the government to take the fdic specifically to take risks on a little over $300 billion of troubled assets to share some of the losses if they exceeded a certain threshhold and it took them months to figure out what they wanted. so, yes, i had a lot of frustrations dealing with citi management. it did undermine my confidence in them. and i just thought, you know, it was the largest commercial banks in the world and they need somebody with commercial banking investment to run it which vikram did not have. he was at morgan stanley and a hedge fund manager. and with a mixed record as well. i did have frustrations, and you know i see what the board said about his two past years at
citi. this is a good move on the board's part. i wish mr. corbat and citigroup the best. >> fab fab is reporting this has happened in the past 12 to 24 hours. "journal" said pandit left after a clash over strategy. isn't at any time board's responsibility to also protect shareholders from shocks or, i mean i want seems like after the conference call the timing of this is something you would even have a problem with? >> well, i'm not going to comment on the timing. i don't know why that would be an issue. they didn't have that great a quarter, you know and it was obviously weighed down by the losses they had to take on the valuation of how they valued the smith barney ownership interest they had and now selling to morgan stanley. again there was a problem with overvaluation. that was a management issue. look, i think there have been -- i think the board is trying to be responsive to shareholders and i think shareholders should welcome this.
and, you know, they put a new ceo in, someone that has direct experience dealing with who they have confidence in, and vikram himself has said mr. corbat is a very competent leader and feels like he's leaving the institution in good hands going forward. so, no. i think the shareholders should welcome this. they themselves have been very frustrated. citi shares have done badly. again 55% said they didn't want mr. pandit to receive his compensation package. i think we're trying to be responsive to shareholders. and responsible to the public as well by putting somebody in with a roven track record that they've worked with over time. >> can you tell me which line in that quarter was bad? because the characterization -- >> which quarter was bad? >> yeah. there's a uniformity on wall street that this was a much better than expected quarter. >> well, that may be. but i'm looking at -- look i'm
not a bank analyst. i don't pretend to be. but i'll tell you a couple of things that caught my write in addition to obviously having overvalued their smith barney ownership interest. their mortgage, they were picking up earnings off of mortgage refinancing but it pales in comparison to what's going on with wells and morgan chase. excuse me. what is their strategic direction? do they want to be in the mortgage lending space? there's a lot of money that the banks are making right now and they ceded territory. is that a business line they want to be in? if it is they are lagging the others. if they are not then why are they in it at all? that underscores the larger problem with what is the -- it's a hodgepodge of businesses and what kind of bank do they want to be. >> i mean i think it was widely talked about that they want to be an international bank and
they obviously, yes, had decided to put many of the resources towards international. some towards fixed income and investment banking but, again, i come back to the fact, i know you have been a long time opponent of mr. pandit and mr. pandit has tone a lot of things that made it unclear that the business had been good. i think that this quarter was the beginning of the turn around. >> well, it may or may not be. i don't know. there's a lot of -- there's a lot of analysts are saying something very different. i'm not a bank analyst. citi probably more than any of the other mega banks or exposed to the fwlobl economic environment and there's a lot of uncertainties. one thing you do need if you're fwing fwlobl bank with far flunk r operations in different countries, you need good information management systems. you need good risk management. you need sophisticated management.
you need a rational legal structure to help you stay on top. need for that is even more acute now that we have a very uncertain global economic environment. i'm not an analyst. you like citi. i think they are fine. there's a lot of analysts who are saying different things. at the end of the day the board needs to make this decision and the board made a decision. they are being responsive and trying to do the right thing. nine shorter term if you get a statement from the board that praises pan department's leadership and integrity is it reasonable to assume there are no more nasties in this affair at all other than some sort of personal disagreement. in other words, there are no black holes in the business because they would have a legal responsibility to come to the market and tell the market there was a problem when the guy went. >> exactly. and look i think, you all are assuming that this was a, you know, a difficult situation from the public statements i don't have any knowledge of this. i mean i take it face value what
vikram said and the board said on this and the issues are out there. they have been obvious for some time. but, you know, vikram said this was his decision. he supports mr. corbat's hiring as replacement as ceo and so i think we should take that at face value. and i do think the board is doing its job and they picked somebody who they worked with for a couple of years now. they have experience with. they've impressed them. i wish the organization well and i wish him well. >> m >> $265 million, included a payment for his hedge fund. the government did come out ahead on this. $12 billion was the profit to t.a.r.p., wasn't it? >> look, i do not rationalize bailouts because the government made money off of them. that's the classic definition of crony capitalism, somebody gets
introuble the government comes in helps them out and takes a share of their profits back. that bailout, all those bailouts should be a one off thing. it troubles me when people rationalize it and say what's the big deal they made money. the subsidy that citigroup got from this, it's a cost and would have been a money losing proposition for the government. the costs are infinite because in late 2008 citi was not going raise capital at any price. the market was closed to them. so i don't think rationalizes it and the taxpayers had to take risks they shouldn't have to take. we didn't know at the time whether on a cash flow basis whether those bailout measures would make money. to rationalize it and say it's okay, three big out from an institution run by a ceo that made $265 million. no. i don't buy it. nobody else does. >> we've had some analysts, sheila, say there's no smoke one
if here. when you say you take the company at their word. your absolutely convinced there's nothing more nefarious at work behind this announcement ? >> they got a very good board at citi. you have mr. pandit, to his credit is putting a positive explanation on this as well. they are trying -- this is a new chapter for them. they are trying to get past all the problems and mistakes they made. and move forward. i think that's what the board is trying to do and i think this is a another step in that direction. again i think the board is doing their job and should be comed. >> sheila it's clear you're no fan of vikram pandit. in the book you said "i thought pandit was a poor choice as ceo." if you're a shareholder from the march loss in 2009, citi is up 250% and that's about double the performance of the s&p 500. can you at least acknowledge
that vikram pandit has done something right for shareholders. >> well, it depends on when you invested i guess, doesn't it? look, i think the -- if you compare share performance, sheer valuations compared to traditional banks or compare it to chase, for citi's share is still performing very badly. and, yeah, if you bought at the bottom of the market you're going to make a profit. you can do that with anybody. but the share is still lagging, certainly jpmorgan chase and wells by far. and, you know, large regionals like u.s. corp, pnc are all performing better. the shareholders themselves said it. why do you think 55% of the shareholder didn't want him to receive his compensation. why do you think that was the case? >> sheila, you have emerged from this and from your time at the fdic with a political view here. you believe, you said recently in an interview the balance of power have shifted too far in
favor of financial interests in washington and you believe workers, homeowners and small businesses have by and large been left to fend for themselves through this process of qe and all this assistance for banks. you have a strong political view here. >> i don't know that it's a political view. i think that's a principled view. i think it's a fact the all view. we shared a lot of money and took a lot of exposure to get these institutions profitable again. and so they made out okay, but no we haven't done much more homeowners, not much more st. paul businesses. income gotten worse. it's a hangover from the bailouts. we didn't down size a sector. we didn't restructure the financial institutions. i think those aren't political views, those are fact the all views and people can gee or disagree about whether, you know, bite the bullet, take your losses, you for the bad assets
off bank balance sheets, you restructure the ones that are failing or prop them up. we propped them up. as the japanese experience shows if you prop them up you have an overhank. banks have bad assets on their books that they nurse over time. i don't view this as political views. i think those are principled views and ones that many others share. what's political is showing favoritism to a bank. that's political, right? make being that bank look healthier than it is compared to other institution? that's political. >> we're going to leave it there. thanks so much for your analysis of the situation. >> thank you. >> i do want to say, from a very high level source, he was forced out last time. board didn't want him any more. board feet he had done everything they wanted to do. they wanted corbat. they did not think pandit was the right man for this next level of the company. so he was forced out is my
understanding. >> there is to be a level of intrigue because board would have had to have meetings prior to that decision being made to know that they all wanted him out. >> agreed. they did force him out last night. forced him out. >> often been said if you fire someone shouldn't come as a surprise to anyone. >> no smoking gun, not compensation, just about that they didn't like where he was taking the bank at this point they wanted someone else to take it. >> given the quarter does that make you skeptical of the board? >> maybe the quarter wasn't as good as you thought it was. >> i still think the quarter was good. look. i think pandit delivered on what they wanted but i guess they felt -- this is my understanding. >> you take bits and pieces from various people. something else i've heard is there maybe a difference in strategy between the chairman in terms of o'neal and the rest of the board. what i hear associated with that is smaller citi smaller.
sort of discreet units and not being quite everything to everybody and pandit perhaps wanted to go or continue in a different direction or the same direction that the company currently is. so incould be a meaningful change in strategy. we don't know. >> that's what i'm getting. total for sale, pan department's direction not way the board wanted. >> if i was a citi shareholder i would be scared in the direction the path the company is on might be dismantled or changed. >> miss bair clearly had no faith, i believe, in the idea that maybe they are an international bank and aware of mortgages, not mortgages. corbat is an investment banker. he's a terrific stable choice internally. just that i think pandit, a lot of us felt pandit strategy was the way to go if emerging markets come back. it was the bric bank and this would be a repudiation of that strategy. >> could be. it could be. i think that -- at the end of the day the most significant
thing that's coming out of this. >> the bank moving in a different direction than we heard articulated yesterday. >> not a personal issue. not a compensation issue. not anything -- no smoke gun. this is my people say, but a genuine belief that pandit's wa. those of us who became accustomed with pandit are stunned. because the board seems to not favor any further international. >> well we don't know that for certain. >> we don't like the way he was doing it. >> but we do need to hear an articulation of strategy from the current ceo. >> if you're a shareholder and liked what you heard yesterday and with ceo and coo out today i would question whether that strategy is intact. 66% gain here. >> stocks up 1.5%. dow broadly up triple digits.
jim thank you for that. >> thank you very much. >> after the break a lot more on the breaking news of the day of vikram pandit's departure from citi. a current board member will weigh in. [ male announcer ] at scottrade, we believe the more you know, the better you trade. so we have ongoing webinars and interactive learning, plus, in-branch seminars at over 500 locations, where our dedicated support teams help you know more
pisani. >> we've been check around with the analyst community to see what they have to say. over at merrill lynch, we don't believe the ceo change is likely to be related toni smoking gun issue and would therefore regard any near-term share price weakness as a good buying opportunity. the stock went positive ten minutes after it went open. the important thing is we're off the highs. 37.40 was the high. city group 37. i 10. still up 1.2%. citi would normally do 40, 50 million shares. we're talking about multiples of order trading just about an hour, hour and a half after the stock opened. the "journal" has some comments out here today. citigroup's board clashed over strategy and performance. citigroup board frustration included performance of the institutional clients unit. guys, i'll keep calling around and see what the analyst community has to say.
back to you. >> for more on pandit's departure let's bring in kayla tausche. my reporting does follow the same story line this was a developing thing that was in informing the top bankers in the last 12 to 24 hours. jim said comp wasn't the main issue. it maybe wasn't the last straw but it was the central issue. pandit earned a salary of $1 a year while the bank was charging through the financial crisis and the u.s. government made a $12.3 billion profit from its t.a.r.p. investment. pandit had his salary restored last year when shareholder saw that base salary and saw it was accompanied by a cash bonus of over 5 million and 8 million in deferred stock and cash they voted it down and still a lingering issue for the bank and board especially as they move to set this year's comp.
mike o'neal took the reins from dick parsons just days before that shareholder revolt. this came up on yesterday's call. when the company was asked what they would do regarding that compensation which still hasn't really been settled cfo delined to answer saying it would be inappropriate for him to comment on issues that were still up to board discussion giving smoke signals that was an issue not resolved. that's not to say internally citigroup is not happy about the choice to appoint mike corbat. he's a citi lifer. he ran two of the most volatile business lines over citi. just the timing of the departure is suspect and a lot of people were very surprised to receive that call last night. >> there are other material aspects as well. on the one hand there's promise to shareholders effectively they would able to pay the dividend which didn't come through at the beginning the year in march and more recently the price that they got for the brokerage.
>> right. that's something that came to pass in the last quarter and definitely affected the earnings that essentially with that write down gave citi a 1% return on equity yesterday. but a little bit surprising you wouldn't announce something like this on a conference call. >> for sure. thank you very much for that kayla. let's bring in kate kelley who has more on the big story and big stock. over to you. >> it sound like jim cramer cooped the "journal" which had a steady stream of interesting headlines. jim is telling us that it looks as though pandit was forced out by the board. like kayla that crystallizes the story line. employees for the most part were surprised by today's news. they learned about it from bloomberg or a press release. they ended up getting an internal memo at 8:30. it said little more than they had already read online. essentially the feeling that even senior executives at least
those not directly involved in this process were inform late last night like within the last 12 hours. a couple of theories are developing sort of among inner circles on wall street and within citigroup about what may have been. two things. one is that pandit himself was fatigued. frustrated by low pay. he came in at 2007. they were just in the mid-of starting to write down billions of dollars of bad mortgage investments and other ill-conceived investments and holdings that they had that would drag the company one. so he righted the ship as best he could, steered the company for five years through pretty treacherous rows waters. he did pretty well. citigroup bought old lane for $800 million at the height of the bull market then he received about $165 million just for that. the following year, 2008, which was his first complete contemporary as ceo he got $38
million in compensation. after that it went down a $1 for obvious reasons. last year as kayla mentioned they raised that package to $15 million all in a package and sort of trajectory that was roundly rejected by the board as part of the say on pay vote an issue that was not resolved. this was all in pandit's head. in coming the board and say listen we're thinking about transition, we're thinking about mike corbat. the theory goes that pandit said forget it i'm out. i won't stick around for an orderly transition. oil walk away. simon and guys that's kind of a theory that's making the rounz that connect the dots that jim and others have been talking about this morning. >> that makes sense and we've seen that happen before. it's interesting, i looked at the composition of this board of directors. doesn't seem to be that strong of a board but they stood up here and made known what they at least felt. perhaps surprisingly to some a
difference in opinion on the strategy this bank. one wonders when they will start with the new messaging. >> absolutely, david. i share a little bit of the surprise even just on your desk this morning in terms of the negativity about the quarter yesterday from sheila bair and from others, the feeling that the board was dissatisfied with pandit's performance. he inherited an unmentionable on television sandwich. he did quite a lot with it over a five year period. the compensation issue was dogging the board and him. i'm sure that was a factor. that doesn't explain why this ouster would occur right now. >> we got a lot to learn about mr. corbat as well. >> absolutely. those who know him regard him highly. i was just talking to michelle caruso-cabrera who met him. even within citigroup those who know him like him. consider him to have a good
reputation. few people have interact with him anyway. >> when we talk to a fund manager who has known corbat since 1983, back in the solomon days. that should be a good interview. much more on the breaking news over vikram pandit's departure from citi. look at that reversal. shares are now up by three quarters of a percent. back in two. [ male announcer ] this is joe woods' first day of work.
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back to the breaking news of the morning. vikram pandit to leave. our jim cramer reporting he in fact was pushed being succeeded by michael corbat who previously served of citigroup for europe. what a doozy. bill george, a former chairman and ceo of medtronic. good morning. >> this comes as a big surprise. i just would like to take a different perspective particularly than sheila bair took. >> yes there are other perspectives. >> i don't have any inside
information by serving on the goldman board or associates. your reporters have late breaking stuff than i have. this comes as a huge surprise. not the way boards normally do this. vikram took over a nearly impossible situation back in 2007. this bank had severe problems for a long time of all the commercials banks. it was in the most trouble at that time. they didn't have a good risk management. didn't have good i.t. systems. they have a weak u.s. position. you had mixed management to say the least. jamie dimon got forced out. and this is all history, i know. but it's perspective on the job that vikram had to do. i don't think the comp stuff is fair either. you can't count how much he got when he sold his hedge fund as comp and probably got a one time that first year. you got to look at it since then. i know that's a problem. that's the board's responsible. they are responsible for sitting his comp.
vikram brought this bank back and stabilized it and stabilized his management team. i'm surprised john havens is going as well because michael corbat may be an outstanding executive but he wasn't groomed to do this. >> do you think this happened in the course of one day and was a surprise to not just perhaps pandit but everybody around him? >> i'm sure the decision happened quickly. normally you would announce this if you're going to do it at a time of third quarter earnings or a day or two ahead. third quarter earnings were not bad. you can look at the one time write offs but that's a normal function right now given the problems they have. so, you know, normally one would signal succession, people coming in and timing and, you know, even when goldman went through its change, when hank paulson
went. this has come as a surprise. so it's not seamless and it does raise questions. i don't know about strategy. but i think vikram had them on a sound course. >> clearly the board disagreed with that. you said this is not the way usually boards do this. you have a great deal of experience serving on the board. if the chairman disagrees what's the way they should have gone about doing this and of course you are never sure hat the ceo should do. this neighbor case. see you later. >> in this case you have -- you probably take the board offsite like a two day strategy review, carl. you consider it. you make a decision. and with that the ceo says i don't agree with that, i want to resign that's fine. if that's what happens. but then you take a few months and you let it happen, have it
be announced in due course like normally at the end. year so the new ceo comes in for the next year. hats the normal way. i don't know anything about citigroup. they have an outstanding board. i'm not being critical of the board. i just don't know. it's not the normal way things are done and will lead to a lot of uncertainty in the ranks. >> that said, from your knowledge of how boards work and the legal situation, is it reasonable to assume here that there's absolutely no smoking gun? there are no nasties hidden in the business in connection with the fact that he's gone because a, the board has appointed a successor. and there's no additional news accompanying this news that we've had today therefore there can be no further news otherwise they had to legally report it to the market? >> legally they had bring it out with the third quarter earnings. you don't bring you want big news the next day.
you're obligated to go through all tissues and present them to your board audit committee and review everything with the aud, to with the board and then you present your earnings to your shareholders and that's happened the day before. so i'm not suspicious about that. by the way the good news is michael corbat has been with the bank for almost 30 years. they aren't going outside casting around for a new ceo. they have someone from the inside who is highly experienced, very well qualified. don't know him personally. very well qualified. they are fortunate to have someone to step-in. i'm saying it's not the normal way i would expect things to be done. >> i want to ask you a question from the shareholder perspective. if you're a shareholder and you are pleased by what you heard and what you got out of the third quarter earnings as well as a conference call and you're hearing today, you're waking up to news that potentially the board had a clash over the strategy of the company with the ceo and then forced him out, would you then question the path that the company is on
currently? would you just book the gain, 6.5% in the past two days and walk away because you don't know what the strategy is at this point. >> i'm not a good one to advise. i would say in this case it's a wait and see. you don't know what happened. we don't know that the board forced him out. these are speculation. i think you got to wait a pu face to let the dust clear and wait for statements from the board and/or mike corbat. we need to give him a little time. vikram needed some time. let's not jump too quick here. it's a lot of uncertainty and let's not beat up on citi. they have come a long way back. the real problem with citi bank in 2007 and '08 and they've come a long way back and i know people are critical of the bailout. this was a much more serious situation even than lehman. i think the government did the right thing and citi has come a long way back and has been on a solid course and i suspect they will stay on a solid course.
>> you sit on an interesting position on the board of goldman sachs. yesterday on the very few comments that were made was about asia and talking about m and a returning in asia and the need for the bank to concentrate there and to melissa's point that may now be in question. do the rest of the board want that focus on asia. what's the wise thing to do at this stage. where should the focus be? >> personal opinion i don't know about citi, but in general asia looks very attractive. citi has a strong position globally and i'm not on the board, it would be logical to leverage that. they've always had a strong position. that goes back to days and they built that position over decades. i can tell you the banks that are doing well in asia built their position. with asians you have to have staying power. so i think they got a strong
franchise there and corbat is coming from the global area. so he's had a lot of experience. i wouldn't jump too quickly to assume anything about their strategy at this stage. >> bill, it's david faber. goldman sachs reported their earnings. your pleased with the performance of the company. think it's on the right track and will you read the book that's recently been published by fwreg smith >> i'm not going to comment on goldman. i think the company is on a solid course. i'm pleased with how the firm is doing. the management is doing an extraordinary job. i'm pleased with the course they are on. the board is as well. >> last question, bill, you know, pandit is not the only management change we've seen at banks. viniar at your firm. your sensing, is there any reason, any explanation for why we're seeing all of this not at year end but in the third quarter? >> no. i don't.
in david viniar's case couldn't have had a better ceo. he's the best ceo not just of a bank. david did an outstanding job guiding the firm through this. when he retires he's going to be, you know, he'll be joining the board. david is a very valued asset. the management of goldman is solid as a rock. i'm very pleased with that. i can't comment on all the other changes that are going on because i don't have inside information on them. i would like to help you with that. but i don't have inside information. >> bill, thanks so much. always good to get your insight. have a great day. >> there's really one story in town today. ahead on the program more on the stunning announcement, vikram pandit is stepping down as ceo of citigroup. stay with us for the latest developments. we'll talk to one guest whose known his successor for many years. who has 11 major brands to choose from? your ford dealer.
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of vikram pandit as aig ceo. >> the new citi ceo michael corbat was with him in the class of 1983 at solomon brothers. charlie good to see you again. >> thanks for having me. wild day. >> to say the least. you guys sold your citi shares i believe last quarter but what can you tell -- based on what we know now what's your reaction to this whole situation and if you were still a holder would you sell at this point? >> a couple of things. one is the bair case about citi has been about governance. management is very highly at these highly levered stooss. citi has had a bad board for a long time. this is a weak board. i don't mean to argue with other people on this show but there's no way that this board decided
overnight to fire vikram pandit. just didn't happen like that. this had to be vikram being unhappy about things. you would never normally want to have this kind of abrupt change. you would want to have six months of the two people working together, finding out where the risks are. people keep talking this morning about smoking guns. smoking guns have already gone off. what you're worrying about is time bombs that are about to go off and michael corbat right now has no knowledge of where the bombs are. so that's the problem with this whole transition. that's why you would never do this unless there was some kind of fight. and i think it probably did revolve around compensation. >> wow. >> some would argue, if anybody knows where the skeletons are buried its corbat. why is that not the case. >> sure he knows the problems in africa, in the middle east. i'm glad he had responsibility for the middle east. but citi has been buying banks around the world for the last
five years. he's got no idea in my opinion about the problems in mexico. he doesn't know tabout the derivative positions. what we need as a transition period for somebody to get to know the world book he doesn't have that. >> at this point you're saying a couple of things. first of all that is i ti hciti host of problems. from this point on you're saying it sound like that there are a lot of time bombs out there that the new head of citi has no idea about and again no reason to invest in this stock. >> every major international bank has got positions that are problematic if things go wrong. as we found out at jpmorgan.
we're going to have a volatile period of time for the next three months. the fiscal cliff i hope will get resolved but it's going to be volatile. positions will move in big directions, derivatives make those position move bigger. you have to have somebody who understands the risks that your organization is taking around the world. >> now you've alarmed me. now i list into you say that. it brings to mind that the chief operating officer john havens has also decided he's not is going stay until the end the year and go now. if it was about time bombs surely they wouldn't let him out the door. >> no. i don't want you to think they let these people go. they didn't let these people go. the board is bad. they are not that bad. this had to be vikram pandit saying that's it i'm out of here. the thing that would make that happen would probably, in my judgment, be either compensation or a decision, strategic decision that he wanted to go, that the board wouldn't back him up on. but frankly at this point i'm
not saying they are big bombs. i'm saying there's potential risks at citi just like every where else and no board wants to bring somebody in fresh and give him the keys without him knowing the risks. >> by the same token no board would let two people from the leadership team go. >> bob rubin wanted to make citi much more like goldman, a hedge funding miniature. vikram had a great hedge fund. nobody felt vikram pandit was going to be the next ceo. chuck prince was the ceo because they had legal problems. then he had had a big risk management problem. so they figure who can be the best risk manager. a hedge fund manager. they were always joined at the hip. >> charles, i'm glad you bring up that history. it's funny i looked at the board
composition. who do i know. not a strong board. but in doing the reporting this morning in a don't know that you've been doing any, you know, it may be that they did push back pretty hard against them on strategy and that, you know, whether it was o'neal the new chairman or diana taylor or thompson there may be more strength on the board than you've giving them credit for. we want to go this way, you want to go that way. >> there was a dispute but there's no way that you'd push out the ceo overnight over that that's crazy. >> unless he says, i'm out of here, guys. >> exactly. he was not fired. that just can't be the case. >> we're dealing with semantics here. the board might have said good riddance even if it was pandit's decision to jump. last question, michael, if, in fact, there was a -- charles, sorry, if there was a dispute over comp -- a dispute over strategy, do you imagine it was the board asking things like why aren't we part of this refi boom? why are we not a bigger player
in u.s. mortgages, or were they just tired of emerging markets? tired of international? >> so we're all speculating here, i think, frankly, the smith barney deal did not go well from citi's point of view. they got their head handed to them in that negotiation and lost billions of dollars, who knows if there were board members who were not happy about how all that went down. they're now basically out of the asset management business and probably some board members who aren't happy about that. you and i are starting to speculate but, again, no way they fired him. >> yeah, well, given all the speculation, just all the more reason the company has to clarify what's going on, charles, thanks so much for your time. good to see you. >> thanks for having me. >> charles b-- charles bobrinskoy. >> i'm humbled by the confidence
and excited by the prosz pect of working with our management team to take our company forward. i say this as a true believer in this company. >> quite a roller-coaster ride for citi in the past few hours considering where it's been in the premarket session, down about 2.5% going as high as -- a gain of more than 1.5% and almost a flat line so a developing story. >> it is the biggest story of the day on a very widely held stock, the stunning announcement if you've just joined us that vikram pandit is standing down as the ceo of citigroup. stay with us for the latest. well, if it isn't mr. margin. mr. margin? don't be modest, bob. you found a better way to pack a bowling ball. that was ups. and who called ups?
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the stunner over at citigroup but another big bank with news. goldman beating on the top and bottom lines boosting their dividend. mary? >> that's right. strong quarter for goldman. it's driven by strength in investment banking, fixed income and investments and lending. revenue declined by 16% from last year. goldman's strong numbers coming despite the concerns about the global outlook. cfo david viniar says a wane of the psychology of ceos and
clients are maintaining a cautious stance. >> the traders themselves have to be more comfortable that, you know the market environment is being driven by not politics and maybe there was a shift. >> a big contributor to that caution among executives viniar says, the pending fiscal cliff. goldman's earnings of 2.82 beating estimates of thanks in large part to unrealized gains in its private equity portfolio. in the quarter, the total amount set aside for compensation increased but reflecting goldman's higher revenue for the quarter, the ratio of comp to revenue was only slightly higher than in past quarters at 44% from over 42.5% earlier this year. goldman's return on equity, measure of profitability edged up to 6.8% and remains below peak levels. it's on goal of cutting 1.9 billion in expenses by year and and looking to accelerate its
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melissa, what is coming up on "fast" or do i need to ask. >> more on citi with jeff sonnenfeld. ibm, intel, it will be important for tomorrow's session. i won't be there tonight. but michele caruso will be there. we're getting a memo from pandit to the company after five extraordinary years i have decided to step down as ceo of citi. so we'll see how much this turns into a he said/she said. great reporting and david, thanks. see you in half an hour. we've had quite the stunner on the street. vikram pandit officially out at citi. here's a look at what you might have missed. >> welcome to hour three of "squawk on the street." here's what's happening so far. >> vikram pandit is stepping down as the ceo of citigroup, the board of directors is electing michael corbat as the
ceo. >> everybody knows him and this was a turnaround team and these people would take a bullet for pandit. took a bullet for havens so we have to figure out what's going on. we need answers. we need answer. >> no doubt i think we can say that he was forced out. i think that is clear. others may say, oh, this was something in the works. this was not in the works. >> do you think it's possible the board took a hard line and pandit said i'm out of here. >> yes, absolutely. that could be. >> don't know what it was but it's certainly possible. >> i take it that what the board said, he did a good job as part of the transition, they feel, but it's now time for a new chapter. >> from a very high level source who confirmed he was forced out last night. the board didn't want him anymore. the board felt he did everything they wanted him to do but they needed a new direction and
wanted corbat. they did not think pandit was the right man for this next level at the company so he was forced out was my understanding. >> good tuesday morning live at post 9 at the new york stock exchange. a quick check on the markets on this busy news day. the dow, of course, up triple digits. up 110 today. we have not had two 90 plus point days in a row since the end of july. so we've bounced well off the 50-day moving average. of course, the big news of the morning, that, as we mentioned citi trading higher after sources tell our jim cramer that vikram pandit was forced out of citi and michael corbat will take his place. john havens also resigning. no one has interviewed vikram pandit more than our own maria bartiromo. take a listen about what he had
to say the last time maria interview had had im. >> as a bank with citi and our 260,000 people with one of the strongest balance sheets ever and we come at it with a very clear strategy, the strategy is focused around the basics of banking, it's focused around emerging markets, growth in globallization, connecting the world and as importantly we'll be the digital bank going forward. we look at all those things as a very strong path for leading this company into the third century. >> and maria bartiromo joins us on the fine. >> hi there. i've been speaking to shareholders this morning and truly there is a lot of surprise amongst them, they are not being given the information from the company any more than we have at this point. there is a feeling from some shareholders that he did not get the vote of confidence from investors on his salary that
compensation could be an issue. i don't want to speculate. i know a lot are speculating in terms of what went on here but there is also a feeling that he was not shrinking the bad banks fast enough as you know. he had a plan to split the company and shrink the bad assets down and sell assets as much as possible which is, of course, what he has been doing for the last several years. there was some feeling that on the board that he wasn't doing that fast enough. of course, you remember the stress test when the bank was told they were not to pay a dividend. that is another upset on the part of shareholders that so many other banks were able to pay a dividend after passing these stress tests and citi was not. the stock, of course, is another issue, down 89% since pandit took over. so that is, of course, being spoken about but at this point there are a lot of unanswered questions in terms of why he's stepping down. i spoke with prince al ali, the
largest single shareholders of citi and said he just spoke to vikram pandit and he is leaving the firm at its peak, of course, pandit has been overseeing, a real recovery here and a lot of people feel he's done a good job in terms of getting some stability back but when you look at the fact that the dividend was nonexistent, was unable to pay a dividend after the stress test, would not promise when that dividend would recover as well as the stock price, you could understand the up ep set on the part of shareholders. the board moved -- this is a different board than has been in charge since the financial crisis and over the years -- over the last couple of years, some new faces here, so perhaps they weren't in his corner the way the former board was. but, again, we are waiting for more information. as far as the new ceo, one positive here is that he has been in charge of international because that probably is the reason if you were to own citi
to own citi, the international story. you know, if you're owning jpmorgan because you believe that there is leadership there that could grow the overall business, you own citi because of the international component and that's one positive with the new ceo coming in, but at this point shareholders are unclear in terms of what this is telling us and what's ahead because we are not getting enough information here from them. >> it's that international growth that has been a positive surprise which is why a lot of us are so shocked this morning. maria see you tonight for debate coverage. thanks for coming to the phone. >> thanks so much. >> maria bartiromo joining us on the business news line. gary kaminsky, more on the departure. i'd love to hear your take. >> let me run through some notes with you, obviously, i've tried to speak to as many people, shareholders, bankers, competitors, those that feel that they know something about what may have taken place on the
board so let's go through a couple of thing, first want to point out as a great investor said to me this morning, this will only add to anxiety in terms of retail investinvestors. talking about the good citi quarter. a lot of the stock was up 5%, a lot of anticipation about what may be ahead. you wake up 24 hours later, ceo out, no discussion of this at all. i mean it just continues to add to this sort of casino mentality of what happens in the overall equity market. so a macro standpoint important to recognize, this will be another concern for retail investors of why the stock market is nothing more than a casino. now, let's go through what i have heard today. number one, there's a couple things to point out. remember that michael neil was brought in specifically to deal with the regulators. the regulators maria pointed out and many guests pointed out have a very important role in not just capital allocation but the overall strategy of the bank. it's also important, you had sheila bair on earlier today. i'm talking to a number of meme inside of citi that the excerpts
of that book and some of the stuff she had said in her book specifically personal tax of vikram pandit, that book came out i believe at the end of the september, right? >> yes. >> she had a number of permanent attacks. i'm told a number of people internally use that in a power struggle in the sense that look at what this regulator has said about pandit. how is he ever going to be the person to sort of help mend our relationships with the regulators. so her personal attack did have an impact internally and a lot -- >> do you think she's partially responsible? >> i'm not saying that but i'm going to say i know factually a number of people internally use that in a power struggle against him. somebody not that shocked in terms of pandit's resignation points out john havens leaving at the same time. that is a big surprise. obviously they've been loyal to one another, came from morgan stanley together but, again, why wasn't the board able to continue to have him there? i want to point out a couple other things too. number one, the morgan stanley smith barney thing, the
write-down, we have talked about it going into the value, this was not a surprise. what eventually happened there, morgan getting the better of that deal, not a big shock here, what i think is the most surprising here, karl, is very simple, i do not -- i disagree, i do not believe pandit was forced out. i think pandit forced the issue and like a lot of people, when he decided to force the issue and said you support me in this way and this way, so he more or less pressed the issue and decided if he was forced out, you don't want to force him out 24 hours after you've just reported this quarter. it doesn't make any sense. >> it doesn't make any sense. but that's a good synapsis of some of the speculation going on. the bare thing i hadn't thought of. want to bring in a citigroup analyst, jeff hart joins us, thanks for coming to the phone. i'm going to go through a brief list of reasons we have heard why he left. some say it was about comp, some
sort of broad disagreement over strategy. gary mentioned the smith barney embarrassment and heard libor. anything on that list, do you think? >> i don't think it's any regulatory kind of litigation type thing. i don't know any more than anybody else but from a libor perspective we'd have a feel or grumbling of something. so i don't think it's that. it could be any combination of things kind of above that including that, you know, apparently mike o'neal would like a more hands-on person at the helm. i'm a little i suppose on one hand disappointed because i really do think vikram was doing the right things strategically. this is kind of a quick move but on the other hand, corbat is the right guy to fill the spot. specifically -- >> why? >> what? >> why. >> well, for a few reasons. one, he's got personal skill, kind of charisma and communication skills. it was one of the things vikram
lacked in getting the message out to both clients and investors, i mean that's one of his strong suits. he's run a variety of businesses across a 30-year career at citigroup including consumer and commercial banking things that vikram was criticized for not having and ran businesses in the emerging markets which is very important for citigroup. of the people they can fill the seat with i think they picked the right person and actually investors even though i'm disappointed to see vikram go, investors may be happy to see mike corbat sitting in that position in the near future. >> yeah, let's talk about the stock for a moment. you got a feel for all of those people who were able to sell amid the panic this morning. i mean we're close to the flat line but we have gone positive, jeff. does it change your view on the shares long term? >> it doesn't and you always get nervous when a senior manager leaves kind of suddenly because it makes you think what blew up but i don't get the feeling there's anything to blow up here. blowing up. i don't think the strategy is
going to change much. i do like the strategy. and as i said i think we're getting a -- you know, a probably better presenter. this may turn into a positive but i don't think it changes the fundamental story of citigroup which is really what i have liked and why i have the stock rated bye. >> it sounds like, jeff, given what you said about pandit's lack of charisma and what gary said about his clearly difficult to repair relations with regulators, maybe he did get the bank to a decent place, but there was really no room for him to take it any further. does that make sense to you. >> that could fit into the thinking. it's tough to say what the thinking was, but you can look back to the comp plan getting turned down, capital returns getting turned down in the c car and got to point to things along the way too. from a timing perspective it seems unusual after they reported better earnings than everyone expected. if the board wanted to make a
move on the ceo, the c car loomed and you want someone to control that process. seems like a reasonable time to be doing it. if it was in the works, which, again, just looking back to press reports in the summer there was a lot of talk about secession plans that suggests something had been in the works for awhile. >> an important question, i think you would have a good feel. i've spoken to major clients of the citibank private bank, very wealthy family. extremely important part of the future of the company. if this was going to be an orderly transition, don't you believe that those families would have some insight or some idea before just picking up a newspaper or turning on a tv today that this change was going to happen? >> yeah, that's kind of -- i talk to more the institutional investors kind of side of the equation but most of what i've been hearing today is, you know, wow, this timing is weird. what the board thinking. why is the board or vikram doing
it this way? they could have done it better. for the most part investors i've been talking to like corbat a lot and don't see hm unhappy th change has been made. >> jeff, always good to talk to you even though it's on the phone. >> good to be on. jeff harte over at sandler o'neill, the hidden history of the crisis. bethany mcclain will have more on pandit being forced out and back after a quick break.
back to the morning's top news. pandit being forced out over at citi according to our own jim cramer. here's a part of the memo that pandit sent to citi employees. pandit says "there is nothing better than our third quarter earnings announcement to demonstrate definitively that we have turned this company around. yesterday's results show this clearly. more importantly, i kwopts be more optimistic about the bank's future." want to bring in beth think mclean, "aauthor of "all the devils are here." your first reaction when you heard this news? >> my first reaction was, okay, well, these jobs are hard. maybe he's had -- maybe he's had enough but very quickly things began to not add up with that and i heard that from a few people. these are hard jobs. pandit's gotten the bank through the worst. time for him to step down but the things that don't stack up obviously the timing as other people have pointed out coming on the heels of this earnings release without any real warning, maybe a little
scuttlebutt but not any real warning and john havens is gone too, that's evidence of some kind of coup. >> i think there's -- if you look back there's been -- there have been a lot of weird hiccups during pandit's regime despite the great job he's done in cleaning citi up, derisking it and i've listed those hiccups, the total write-off of his hedge fund that citi bought has to have left a sour taste in people's minds and pandit made a couple hundred million cigars out of that. what happened last spring when the federal reserve voted down citi's efforts to increase its dividend and going very much going against what pandit had been telling investors then shareholders voting down his pay package this spring. again, another not just the substance that shareholders are saying but another black eye and
you have to believe those have been creating tension. >> those hiccups you describe, bethany are largely in the past. do you think it's a matter of them having added up over time or is there a bomb thaw think is yet perhaps to go off? >> i would guess that it's those things adding up over time. there's just -- there's nothing in citi's earnings release that looks like a bomb about to go off. here's the weird thing someone pointed out to me that the new ceo is already on the website list of directors and has already been added. when you go to citi's website, they've already got a head shot of the new guy on all of the pages. imagine if the rest of the bank was that efficient they must have hated pandit to get him out that abruptly. >> as far as we're aware -- i think pandit was off the site by the time we went to air at 9:00 a.m. eastern today. that's fast. >> right, doesn't that sound like that incredible ruthless efficiency about something. and then i have not looked at this, i'm not sure this is
accurate but someone told me he didn't -- he's not getting any big exit deal to go and that, again, smacks of a coup, right? >> as meredith whitney said, some of these jobs should come with warning labels as to how quickly you can be booted out out of meredith's note this morning. betha bethany, thanks for coming to the phone. we'll have a lot more on the story. pandit out at citi when we're back in two minutes. i have a cold... i took dayquil,
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to rick santelli talking citi with one of our best friends. >> peter, welcome. we bailed out the banks, the handful we bailed out are larger than the crisis before and learned vikram pandit is out, not the only one. any thoughts? what do you think about this and do we pay too much attention to these big banks's they get
bigger? >> why wasn't this announced yesterday co-incident with earnings. investors made multibillion dollar investing decisions yesterday. booked on those earnings assuming that was the only news they had to focus on. and they had a deal with this issue. so that's the only main thing that i have. but, of course, beak a major money center bank that got a lot of money from the government, the microsoft -- microscope is certainly on them pretty closely. >> we also -- i loved your write-up today. we had to release a cpi and your write-up came fast and furious and everybody was passing it around. seasonally adjusted cpi is at a record high. you know what, for those that don't watch the nuances of numbers explain to somebody like my mom and dad what that means for them, their pocketbook and how far their dollar goes? >> well, using that measurement, the cost of living is at an
all-time record high. no inflation, price stability. but the fed looks at rate of change. and here's the analogy that i like to give. if oil goes from 50 to 100 in one year and then the next year goes from 100 to 98, well, the fed calls that deflation. but, of course, it's not because the consumers are choking on a big spike in their cost of living. i want to point out that take away the focus on the rate of change and look at the cost of living is at an all-time record high and if you pulled a l ee ed a lot of the american people you would find out theirs is not. >> you're saying it's like the sears tower in heighth even though month to month we look at the top floors changing. another release this morning, treasury international capital flows, tick data. i'm sorry. this one made me mad. i'll tell you why in a minute. play along, you also said something yesterday that if you look at mortgage rates on the retail side, okay, not the securities, how much is the
actual mortgage rate on a 30-year fallen for the average guy with the announcement of qe3? >> it's only fallen about 15 basis points relative to the about 30 basis points that's fallen -- >> but much lower yields which begs the following. tick data is almost two months in arrears so they telegraphed what they were going to do. the likes of china, the bahamas, europe, where were all the big investments? agency securities. peter, tell me who made all the money. >> right, exactly. or overseas friends that seem to be financing our major deficit. >> thank you, peter. running out of time. always a pleasure talking to you. carl, back to you. >> rick, talk to new a few. when we come back, the inside story on the man who is replacing vikram pandit, also bring you the european close in about 3 1/2 minutes. [ female announcer ] want to spend less and retire with more?
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you know, we spend so much time discussing citigroup state much side we ignored a lot of the european news largely the story suggesting that spain could eventually get a credit line from the esm, as somebody said a box where you -- in case of emergency you break the glass, maybe that's a way to scare investors out of these shorts. >> of course, the story we had in europe, will they, won't they with the spanish waiting for so long to not come to the table tore ask for the bailout that triggers the buying of its bonds.
when you had that briefing in madrid to the international press suggesting they were ready to apply for a precautionary line of credit we were set up for a rally on the asset market and then two german parliamentarians suggested that germany might be okay with that coming through. let's have a look. >> the european markets are closing now. >> in a couple of moments i hope to show you session charts of where we've been on the italian and sovereign debt and perhaps the euro. the degree of the rally you've seen in europe, strong green across the screen as you can see, notice how spain has outperformed, as well. what's happened within the session is that one of those german lawmakers has suggested his comments may have been overinterpreted. for the very strong rally you've had on, for example, the italian and spanish debt markets has just fallen back a little bit so the yields that have been pushed downwards have begun to rise again. and you see the euro coming back
off its highs, as well, as there's still questions in the market. however, there is a very strong rally on the spanish market as you saw there and it's continued to rally through the session and the banks have also done extremely well around europe today. they did that from -- the inheritance overnight from what citi was saying yesterday and from the earnings perception was actually quite positive. you saw it in asia, as well. there was a rally on the banks. you see it continued. deutsche bank, lloyds bank even the spanish bangs, still it's been able to rally on the market. santander up there. and rbs suggests or intimating it may have been perhaps a bigger issue. what is also interesting today in a market generally higher and really reminded of what was said
at the beginning of the week, how central banks, this is the co-ceo of pimco, penal banks over the last few months have reinflated the wedge that separates weak fundamentals from market prices so today we have a 12th month announced on automotive sales declines and accelerating sales declines within europe and you saw some of those automotives do badly. we had renault had a 33% decline on its sales but interestingly it's actually the tire manufacturers that have borne the brunt of the selling today. rememb remember, these stocks are still down in a market that in general terms has rolled higher over that confusion on spain. >> the worst month of the year in terms of year-over-year declines. >> it continues to accelerate down. >> tough news. thanks, simon. breaking news on batterymaker a123 systems.
>> not surprising to hear that a123 filed for bankruptcy protection. got word that the company was not going to make a couple of debt payments on debt totaling $145 million. that's the total amount of the debt not the payment that's due. once we saw those filings, it was fairly clear that a123 was moving closer to bankruptcy and now they have actually filed for bankruptcy protection. this is not a surprise given what we've seen happen for the electric car market, not only in the united states but worldwide, what was a lot of demand and enthusiasm for that market has clearly slowed down as people have pulled back and said, is this market ready to grow as initially projected and, remember, a123 like so many other companies, they went into this by expanding aggressively over the last three years, some of that was department of energy loans that were taken out and now, we're starting to see,
carl, that tire market there, they've pulled back and this is the latest example with a123 filing for bankruptcy protection. >> yeah, of course, phil on a day when we're going to have a presidential debate at hofstra, some are saying this might get lumped into the solyndras of the world after having got that money from doe. >> absolutely it will. mitt romney will no doubt -- i can't say -- guarantee that he'll bring it up but most expect him to and for a lot of reasons so i think that we'll hear more about this tonight and the days to come. >> all right. phil, thanks so much for that. phil lebeau joining us talking about a123 systems. meantime, gary is here, moved his way over to the citi post at the nyse. >> carl, i'm right behind you for the viewers who see that shot at the barclay's shot where citi is trading. reason i come here, real simple. try to understand what's happened look at the sales. the fundamentals, if you knew that the ceo was going to be either forced out or decided to push the issue and decided to leave, whatever that be, if you
knew that after a big volume day yesterday and plus 5% day you'd have the news you'd expect the stock would have had a major sell-off. but take a look. in we look at time and sales, you see what happens. stock was down early this morning, rallied from 9.50 up. technically tested around 10:45's yesterday close and rallied up since. if i was a technician, i won't play one on tv i'd say it was a positive action because the fact it did have a big up day and did have a big volume day and i think a lot has to do with the filing called. until otherwise told these are the fundamental things that won't change. the stock is still trading at about 0.7 --.7% of book value. still emerging market play and still has in the future if they can get the situation with regulators repaired you've got a dividend and buybacks. looking at the post i got to tell you i think if you're going to hope that the stock would have been down sharply today, not going to happen.
>> yeah, i've already heard from some they were glad they didn't have a chance to sell benefitting this morning. want to get more information on the man taking pandit's place over at citi. michael corbat. our michelle caruso-cabrera is back there with a man you have met. >> one of the few apparently. we had dinner about a year ago. di not invite me. we were invited by a person we both knew mutually who wanted to do a small discussion about the state of the european banking crisis, particularly what was happening in italy and i have to say he was very soft-spoken. extremely well spoken, as well, but very, very willing to let most other people at the table talk. it wasn't a big self-promoter. did not talk a lot. i'd say we know a lot of individuals who are probably aspired to this job, who we would describe as having a lot more swagger and from what i can tell mr. corbat has zero swagger, all business, very straight up and a very calming individual at a dinner that at
times it was the depth of the italian financial crisis, we were still watching yields move around dramatically. there was still a lot of fear that the dow was moving by a couple hundred points at the time depending upon what was happening in europe. a very calm individual. he came off to me as a very impressive person. >> we all know it's that citi holdings experience that will come into play. maria reporting that there's a widespread sense within the bank that pandit was not shrinking the bad bank fast enough. this is -- that's going to be his mission. >> and he knows a lot about it obviously, correct? and also he's been in europe so he knows a lot about very bad assets that are on the books of the banks over there and how they've been slow to get rid of distressed assets, as well. so that probably fits into what the board was thinking, certainly. >> yeah, well, the fact that so people know him or have had dinner with him so far shows you what an unknown he is. >> exactly, exactly. >> good guidance from you,
michelle caruso-cabrera, bob pisani is here at post 9. i assume we'll talk about the fact that the dow is up 122. >> i want to show you coming from mike mayo, mike is a very respected financial analyst over at clsa. he's going to be on "closing bell." here's what he put out, the transition of the ceo reflects a micro come of the poor corporate governance under vikram pandit. more importantly sort of weighing in on the fact there may have been compensation issues around. put up the next quote. he says "citigroup had what we considered rigged compensation schemes with artificially low hurdle rates for incentive pay reflecting some of the worst alignment of pay with performance that we have seen." mr. mike went on to talk about the poor performance of the stock since mr. pandit came in. he's right about that put up what's been going on. pandit came in december of 2007. since he came in, stock down
89%. bank of america, down 79. morgan stanley, 64. goldman sachs down 41% and jpmorgan only down 8%. so there's been disparities in performance. i want to go to the rally we've got. i know it's not the hot topic but, folk, we're doing it. citigroup and gary is right. we went positive early on citigroup. almost approaching 100 million shares now. that's 2 1/2 times the normal volume and only 11:30 eastern time this. is going to be a big volume day for citi. meantime, take a look at the s&p 500, 1465 is the old closing high. look at this. we're only 10 points away, 12 points away from a new closing high on the s&p 500 and that was just a few weeks ago. here this is just the three-month chart that you're looking at. particularly nice day for material stocks and energy stocks are doing very well. i just want to put up the financials and note what's going on. a little bit of bifurcation going on today. you notice the big money center banks like jpmorganchase, bank of america on the upside. look at some of the regionals.
pnc, fifth third and zions, look at the top line on pnc, they beat on the headline numbers but there's a little bit of problem. they had the same problem that wells fargo had and that is margin shrinkage specifically net interest margins to the downside and hurt wells fargo and hurting pnc. this issue about low interest rates and the inability of these companies to make a lot of money in certain circumstances is really mattering and that's why we're seeing some of these regional banks that are down here today. >> interesting dynamic. thanks a lot, bob. bob pisani. a lot more analysis on the big news at citi. how to play the stock now that pandit has been forced out. look, if you have copd like me, you know it can be hard to breathe, and how that feels. copd includes chronic bronchitis and emphysema.
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exclusive guests. back to you. >> thanks so much. getting back to the news of the day, citi's ceo vikram pandit forced out as ceo effective immediately. david trone joins us on the news line. >> good morning. >> so much discussion as you know about was he pushed or not. does that make a difference to you in terms of whether or not you want to hold or buy the shares? s>> probably not because i thin in all -- i do think he was pushed and i think it was probably just your -- you know, run-of-the-mill disagreement on the future, you know, on the strategy and, you know, vikram was a strong-willed guy and i think michael o'neal is, as well. michael o'neal has had great experience turning around banks and i think, you know, it was more of a plain vanilla where do we go in here differing opinions and vikram had to go. >> yeah, you think smith barney might have been the straw that
broke the camel's banck? >> i do. i'm using the luxury of hindsight in early 2009 citi needed capital desperately. the smith barney -- excuse me, morgan stanley smith barney jv was set up to get capital infusion to citi. as it turns out, though, they had massive mortgage losses above and beyond what they thought and it ended up not being enough and they had to get bailed out by the government. so it ended up a transaction that did not really fulfill its original purpose and at the same time they gave all the cards to morgan stanley and morgan stanley played them very well. >> yeah. >> to get a steal here in this transaction. >> we're looking at an alert on your screen from dow jones saying that the resignation was my decision, according to pandit. they may be citing a memo that was released earlier this
morning in which he said after five extraordinary years i have decided to step down as ceo of citi. dow jones may have additional reporting as -- that leads to that alert. david, you say changes at the top always increase risk. so why isn't citi more risky this morning than it was 24 hours ago? >> well, i think it is. and, you know, this is a very, very large complex organization and that's not an opinion that the investment community had just since the crisis. you know, people were talking about that pretty vigorously back in '06 and '07, is citi too big to manage? and now you have a relatively abrupt change in the ceo. havens has gone, as well and they're probably will be, i'm sure, michael corbat will put his mark on the leadership team, as well so you'll have a lot of people moving around in the new positions if not departing at a time which is still very dicey, the eu crisis could still become
a serious problem at some point and you have the u.s. fiscal cliff coming down the road, as well. >> some have postulated this morning there may have been more to just -- more to this than just a disagreement about compensation but might have been about real strategic long-term decisions. was that apparent to you covering this company this year, that whether it was somehow regarding international? i mean something bigger than like, say, on pay that was going on here? >> well, you know, i wasn't in the boardroom, of course, but my -- you know, my first, you know, impression, well, my first impression of vikram when i met him many years ago when he was at morgan stanley was strong willed confident guy and have a board that's the same, especially with michael o'neal, i met him as well many years ago and it was probably inevitable with a company this complex with many different directions it could go that eventually, you know, there would be that breakdown in the symbiotic
relationship but i think -- i do think it was over something more significant and i do as i mentioned think that the board was upset looking back in hindsight at how the smith barney transaction ended up. >> yeah, finally it's been said by some analysts that citigroup is the least interesting of the big four in our opinion. this is one saying that no ceo is going to be able to change that fact in the near term. do you agree with that, and how does that square with the quarter yesterday that was well received? >> i largely agree with that. you know, citi is a company that was weighed down with tremendous level of toxic assets that had -- you know dumped them right away they would have been bankrupt even with the government bailout so they had to wean those off slowly into the market. that's a process that only had one option and that option continues to be there. they had be, you know, whittling these down for years to come.
they now have lost one of the most valuable properties that they had in smith barney, you know, so it's -- there's not a whole lot of leverage to pull here. they've had a lot of cost kous cuts, the investment bank is still strong and asian operation is pretty important too and crown jewel so they have some assets, i'm not going to say this is a troubled company or anything like that. but there's not a whole lot of different options for michael to look at here. i think there will be more tactical types of thing. >> david, great stuff. appreciate your time so much. >> thank you. >> david trone joining us from jmp. market is the midst of a nice rally. up 120. the one and only art cashin will be here on how to play that. customer erin swenson bought from us online today.
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welcome back to "squawk on the street." i'm courtney reagan at the markets flash desk. ww grainger, power tool, industrial equipmentmaker. missing wall street's expectations largely because it's setting aside money for an anticipated settlement charge but also full year revenue citing they've got a tough, tough global economic environment. shares down almost 6% in heavier than normal volume. carl? >> leading the loser board to a large degree.
thanks, court. want to get insight from art cashin. always good to see. >> you always good to be here. >> a couple nice days. >> back to back. >> i'm told we haven't done 90 plus two days in a row since the end of july. >> i don't have my little handbook but i would think that's probably right. again, we're benefiting from europe. they had a big play over there. and we've had a string of maybe suspect but certainly better numbers. everything from the unemployment rate to initial claims to whatever. confidence numbers, a variety of things and i think clearly importantly the bulls are making the case that the market tested, for example, the s&p, tested the 50-day moving average, several of the markets, the indices have tested uptrend lines that have been in place. so they have declared the sell-off over and the bull market resumed and it looks like they've got a lot of believers today. >> what's resistance now?
>> resistance now is probably up around 1459 to 63. somewhere in that range. >> how much of this do you think is our data and our earnings versus what would be credit line for spain and some of these german lawmakers? >> i think it's probably 30% to 40% what's happening on this side of the pond and the balance, what's going on in europe. i mean, the end of the world has been postponed for awhile. so i don't know how long. but it seems to be in order. >> some analysts are having to tick up some of their third quarter estimates. we knew they were a little pessimistic going in. are you seeing anecdotally things are not so bad for some s&p 500 companies as we thought? >> well, i'm also reading people doing interviews and i don't see the ceos being that optimistic. i think the analysts may have overshot the gap and the important thing to remember is,
over the last five years american companies have learned to get lean and be far more efficient and they do things with ten people that they used to need 15 to do. so even though the profit margins which were at records are contracting a little bit they're not contracting as rapidly as some have thought. >> of course, tonight, intel and ibm. intel being in pcs almost its own story, but people will be watching ibm, won't they? >> yes, ibm is morphed itself into a completely different operation. you know, it's heavily into service in some areas, it's become a key factor. it's really very cleverly reinvented itself and it's not the big framemaker it used to be. >> finally last note on october, will you keep dancing around positive/negative for the month. a month we know comes with a jinx sometimes. how comfortable are you feeling about where we are? >> i would feel more comfortable
when we get past -- >> halloween? >> yes, halloween will also make me feel good. i like to get past the third monday in the month and things tend to get a little easier after that. >> art, have a great day. >> thank you. >> art cashin. a lot more on vikram pandit out at citi after the break. more "squawk on the street" coming up. mbers of congress. in celebration of over 75 years of our government employees insurance company, or geico...as most of you know it. ...i propose savings for everyone! i'm talking hundreds here... and furthermore.. newcaster: breaking news. the gecko is demanding free pudding. and political parties that are actual parties! with cake! and presents! ah, that was good. too bad nobody could hear me. geico. fifteen minutes could save you fifteen percent or more on car insurance. we create easy-to-use, powerful trading tools for all. look at these streaming charts! they're totally customizable and they let you visualize what might happen next. that's genius! we knew you needed a platform that could really help you elevate your trading.
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gary and i are here at post 9. what might have led to this. is it hard to believe this all might have been brought about by basically one strategic decision? we're talking -- >> this is what i heard, whether you're bullish on citi or bearish on citi, whether you believe like i do vikram chose at this point to push the issue or believe like others that he was forced out, what you've heard from everybody consistently, morgan stanley got the best of that. some say citi had to do it at a time when they were coming from weakness. this is a theme we've been on for months. morgan stanley got the best of that deal they'll say years from now. >> trone's point, they did what they had to do. you disagree. >> some will argue that was the easiest thing for them to do in terms of raising capital. you always have choices but morgan stanley,