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After Merrill Lynch, Citigroup's CEO "Resigns"

The surprising downfall of Stan O'Neal at Merrill Lynch & Co. has caused the CEOs of Wall Street's biggest banks to start updating their resume, or spruce up the holiday home in South of France for an extended break coming up. We are seeing the remnants of CDOs mess finally catching up with the big guys. O'Neal became the first chief executive to be shown the door after leading the world's largest brokerage to a US$2.24 billion third-quarter loss — and he is unlikely to be the last. Chuck-eeze Price finally calls it quit. The funny thing was that O'Neal was a respected figure within Merrill Lynch but most employees really do not like Prince at Citigroup. Hence popularity is not a factor. Following Prince should be Bear Stearns Cos.' James Cayne, but could be saved by the swift deal with Citic Securities as the board there feels they will need some follow through with the joint venture.

The scale of the write downs is no joke. Write-downs across Wall Street have wiped US$25 billion from the income statements of investment banks. But analysts have begun to speculate that more pain is left — and that Merrill Lynch might have to write-off another US$4 billion after a US$7.9 billion third-quarter charge. The big banks had been delaying biting the bullet as the top guys busily lobbied for Paulson to step in to create a US$100 billion Superfund to bail out the current credit mess. Well, at least the Fed and Paulson did not do a LTCM bailout this time. You reap the profits and took the fees, now thre is a slashing of asset values of the paper you hold, you cry like a baby asking to be rescued - you are a big bank now, in fact they are among the biggest in the world, so take your medicine and be quiet.

Don't think that these CEOs are like the Japanese CEOs who would perform corporate seppuku should they find themselves in similar financial straits. No, no ... these CEOs went straight into action when the credit problem exploded, and started ascribing blame and chopping heads, to offer to the "gods" as "offerings" to save their own jobs. Bear Stearns Chairman and CEO Cayne dump Warren Spector, who ran two hedge funds that imploded from subprime losses. At Citigroup, investment banking head Thomas Maheras was cut. And, O'Neal swiftly showed the door to fixed-income head Osman Semerci. Ken Lewis, CEO of Bank of America Corp., also swung the axe. He slashed 3,000 investment banking jobs, fired a number of top executives, and stopped offering home mortgages through brokers. Sometimes, even the "gods" are not easily swayed. Ok, let's rearrange the chairs, and put the music on again.

Before anyone starts to feel sorry for the CEOs, let me remind you that Stanley O'Neal got US$160 million as his severance package. Prince should get a similar sum. The Citigroup board was highly likely to name Robert Rubin, the former Treasury secretary and an influential adviser to its embattled leader, as its interim chairman at an emergency meeting yesterday. Gawd, now Goldman Sachs really, really controls Wall Street & the world (Rubin and Paulson were ex-Goldman Sachs clones).

What pulled the trigger for Citigroup was a SELL report by Meredith Whitney from CIBC World Markets (ranked #2 stockpicker in 2007 Forbes survey). The report said that Citigroup needed to raise US$30 billion to resore its cash cushion for payments to investors. Citigroup' share price lost about US$3.00 or 7% of its share value following the report.

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