But Old Lane’s failure managed not to tarnish Pandit himself; after all, hedge funds were suffering across the board, and Pandit’s credibility as a steady hand was not affected. So in early 2007, Citi C.E.O. Chuck Prince decided to buy Old Lane as a way of bringing Pandit and company onboard. Citigroup vice chairman Lewis Kaden, who was involved in the acquisition, says that buying Old Lane “was appealing to us because of Vikram’s reputation and experience” and because it would bring in the “half a dozen founding partners,” including Havens and Old Lane risk management chief Leach (who would assume the same post at Citi). As Kaden puts it, the purchase of Old Lane was grounded in “optionality”—the idea that “people with this background could play other roles at Citigroup over time” instead of simply running a $4.5 billion hedge fund.

The price Citi paid for Old Lane was never announced publicly, but it is privately confirmed to be $800 million, one-fifth of which went to Pandit. When the transaction closed in July, he received $165.2 million for his share of Old Lane, $100.3 million of which he put back into the fund, according to company records. There it will remain, in either Old Lane or other Citi hedge funds, for another four years. Pandit has the $65.2 million he cashed out, another $2.5 million he was awarded by the board in January, plus restricted stock grants and other goodies that should push his first-year pay well north of $200 million.

After the acquisition, Pandit was promptly named the head of Citi’s ­alternative-investments unit, which now included Old Lane. Other fund managers from Old Lane were shifted elsewhere, however, which triggered a provision in the fund’s partnership agreement that allowed investors to bail out if three or more key people departed. Almost all the investors—mainly institutions—decided to pull out their money. When the fund was shut down to outside investors in June, it was almost an anticlimax.

Old Lane certainly served its purpose, though, if its purpose was to function less as an investment vehicle than as an expensive way to bring Pandit and his cohorts to Citigroup. After six months of heading the alternative-investments group, Pandit was named head of the institutional clients group in October. Then in November came Prince’s forced departure, and Pandit emerged as C.E.O.

Just as Prince, a lawyer, was the right man for the Citi helm in the wake of its Enron and WorldCom misadventures, Pandit fit the moment. Risk, having been handled so badly across the industry, had become a Wall Street buzzword, and Pandit was viewed as Mr. Risk. It was his brand, so to speak, even if, in reality, that branding was a stretch: Old Lane was clearly a disappointment, and even Pandit’s Morgan Stanley experience was more about avoiding risk than dealing with it directly.

Pandit has surrounded himself with an inner circle of trusted advisers, led by Havens and chief administrative officer Don Callahan. And he has researched his plan to fix Citigroup with a focus bordering on obsession. He has consumed every scrap of information about Citi that he can, reading yellowed texts with titles like Marcellus Hartley, A Brief Memoir (Hartley was the first president of the International Banking Corp., which was acquired by the old National City Bank) and carefully preserved annual reports dating back to 1956. All were provided for him by his fellow history buff John Reed, whose name is duly inscribed in each volume. Together, the volumes chronicle the corporate folklore of the tradition-conscious financial superstore that Pandit now runs.

Pandit has traced the company’s various permutations back to 1812, when the City Bank of New York was founded as a successor to Alexander Hamilton’s ill-fated Bank of the United States. “With any organization that’s been around for 200 years, it has a history and culture,” he says. “It develops a unique DNA in many ways. To get a clear sense of that picture has been very important to me.”

The unflattering truth about Citigroup today is that the company’s defining quality is not innovation—not A.T.M.’s, unsecured personal loans, credit cards, or any of the company’s other firsts from its golden days—but overreaching (as with the subprime mess) and stagnation. No amount of nostalgia can paper over the troubles that face the sprawling company. Of the 25 independent research firms surveyed by BNY Jaywalk, only five rate Citigroup shares a “buy,” with the rest rating it “neutral” or “sell.”

In the first nine months of Pandit’s tenure, the company has been hit by staggering losses stemming from the burdens of the recent past. Citi amassed $7.6 billion in red ink since Pandit came onboard, with mortgage-related write-downs (mostly the legacy of his predecessor) exceeding $54 billion, much of that from subprime securities and other mortgage-related financial instruments. Citi, of course, was hardly alone. Prince was eased out the door at almost the same time as Merrill Lynch’s Stan O’Neal during the same round of subprime-related head choppings.