PE and the Citi
One would think that leaders of large financial insitutions whose very existence is dependent on the kindness of taxpayers would be more circumspect in their words and actions. It’s not a blunder on the same scale as the recent tough-guy talk from AIG’s new chief executive, Robert Benmosche, yet today’s news that Richard Parsons will join a private equity firm is a little worrisome.
The statement announcing that Parsons will become a senior adviser to Providence Equity Partners, a private equity firm known for its many media investments, stresses that Parson’s “primary business activity” will continue be as chairman of Citigroup. The new role, however, still suggests that Citi no longer requires Parsons’ full-time attention — a suggestion that Citi’s legions of skeptics will find astounding.
Parsons, to be sure, may no longer be needed as a “referee,” as the Wall Street Journal had it earlier this year, in the acrimonious relationship between the bank’s management and its regulators. And the management reshuffle and restructuring, not to mention the discussion toward paying back some of the government’s investment may be steps in the right direction.
But there are few if any signs of a turnaround. The core banking business is still weak, with several billions of dollars of additional loan losses expected. The chief executive, Vikram Pandit, has his supporters, but his survival is anything but guaranteed. And the bank is effectively a subsidiary of the U.S. government.
So is this the right time for the chairman of Citi to be focusing on media deals? Sure, having the former chief executive of Time Warner join Providence makes loads of sense. But it still looks bad. Taxpayers may well wonder why the chairman is broadening his portfolio when they have
a $45 billion invesetment and a guarantee on $300 billion in assets at stake.
The New York Times reports that Parsons’ move was originally planned to be earlier in the year until it was delayed so that he could focus on Citi’s problems. He should have waited another year.