Skip navigation


Current DateTime: 03:06:17 16 Nov 2009
LinksList Documentid: 24355697

FEATURED QUIZZES


Current DateTime: 03:06:17 16 Nov 2009
LinksList Documentid: 33793611
  • The Billionaire BFF's

      Philanthropists. Bridge partners. Hockey players. Which responses are based on facts from Buffett's and Gates' real lives?

  • The Many Myths of Coca-Cola

      Can you tell which statements are true, and which ones are just rumors?

  • Think You Understand Markets?

      We've selected some questions from the Financial Industry Regulatory Authority's test of investor knowledge. See how you do ...


Current DateTime: 03:06:17 16 Nov 2009
LinksList Documentid: 24890560
  • Winterizing Your Portfolio

      If 2009 was the winter of our discontent, will 2010 be a winter wonderland for investors? A lot depends on the recovery—or lack thereof.

  • Investor's Guide to Real Estate

      Some even say the long-awaited recovery is here. Regardless, buyers and sellers alike can profit from our guide.

  • Alternative Investing

      Stocks and bonds? Sure. But it's a big world out there for investors.

powered by digg
Citigroup to Abandon Role As Financial Supermarket
By: Charlie Gasparino, On-Air Editor | 13 Jan 2009 | 12:10 PM ET
Text Size

Citibank
Citigroup
CEO Vikram Pandit plans to announce in the coming days a major shift away from the "financial supermarket" model that has guided the bank for the last decade.

The development comes as Citigroup [C  Loading...      ()   ] and Morgan Stanley [MS  Loading...      ()   ] work toward an agreement creating a joint venture of Citi's Smith Barney brokerage unit, which sources say could be announced after today's closing bell.

The deal would provide a capital boost for Citigroup. But it will also be the first step toward the breakup of the massive investment bank, which is under pressure to raise capital to stem losses.

The eventual breakup of the supermarket model—in which a bank handled a client's every financial need, from investing to insurance—would mean that Citigroup would become more of a traditional bank like JP Morgan Chase.

The core of the remaining company would be a global wholesale bank with some investment banking capability and include private and regional banking.

Video: CNBC's Charlie Gasparino discusses Citi's plan to focus on its core business.

Citigroup's former CEO Sandy Weill developed the financial supermarket model in 1998 when he fought successfully to allow the merger of Travelers with Citibank. The merger circumvented the Depression-era Glass-Steagall Act that separated commercial and investment banking and helped pave the way for the banking behemoths that have been crumbling during the credit crisis. Glass Steagall was repealed in 1999.

The dismantling of Citigroup's supermarket model is being made under pressure from the federal government, which has loaned Citigroup $45 billion in recent months and agreed to absorb the losses on a huge pool of mortgages and other assets.

Citigroup is expected to announce another massive loss for its fourth quarter.

Morgan Stanley has been ailing as well, albeit not as bad as Citigroup. This deal gives Morgan's new business model of providing advice to large companies and small investors a boost.

The firm will control 51% of the joint venture with the right to increase its share in future years. In effect Morgan Stanley would control the largest brokerage firm, with 18,000 financial advisers compared to the 16,000 at the Merrill Lynch subsidiary of Bank of America [BAC  Loading...      ()   ].

—Reuters contributed to this report.

© 2009 CNBC.com
Tools:
Print EmailAdd This share icon
  • digg share

CNBC HIGHLIGHTS

  • Warren Buffett and Bill Gates spoke to Columbia students, and Buffett made the students a startling offer.
  • Brian L. Roberts
  • For the chief of cable company Comcast, growth has been about making deals – generally very large deals.
  • Some companies may start using insurance to shift carbon risk from their balance sheets to maybe... yours?
  • The president and founder of Genesis Today wants to improve America’s health, and thinks Wal-Mart can help.
  • Switzerland's privacy watchdog is taking legal action to force Google to make changes to its Street View service.
ADD COMMENTS
Remaining characters


Current DateTime: 01:58:09 16 Nov 2009
LinksList Documentid: 29778428

Current DateTime: 01:58:09 16 Nov 2009
LinksList Documentid: 29779196

Current DateTime: 01:38:26 16 Nov 2009
LinksList Documentid: 29779199

Current DateTime: 01:38:26 16 Nov 2009
LinksList Documentid: 29779198
  Data is a real-time snapshot  *Data is delayed at least 15 minutes
Global Business and Financial News, Stock Quotes, and Market Data and Analysis

© 2009 CNBC, Inc.  All Rights Reserved.
A Division of NBC Universal
Thomson ReutersThomson Reuters