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From Citigroup to Citicorp
David Enrich says that the new big idea over at Citigroup is "to focus on wholesale banking for large corporate clients and retail banking for customers in selected markets around the world". If that ever happens, I have the perfect name for the new entity: Citicorp. It could even do a lot worse than to re-hire John Reed as its CEO; at least he has a proven ability to run such a thing.
The problem, of course, is how on earth to get there from here. No one has any particular interest in buying the other disparate elements of Citigroup, from Primerica to the credit-card operations and the investment bank, and it might be easier, quicker, and more elegant to simply spin them off to shareholders as standalone operations unburdened with much if any debt.
But that would imply that rump Citi -- Citicorp -- would be the "bad bank", rather than everything else, which seems to be the present idea.
If you are going to create a bad bank, though, putting the dodgy assets in Citicorp seems to me to be much more sensible than trying to attach them to anything else. After all, Citicorp was insolvent once before, during the debt crisis of the 1980s, and it managed to emerge from that crisis, thanks partly to Reed's leadership. Maybe he could manage the the same feat again.
