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The final straw with Citi

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 ”We have and will continue to exit several forms of proprietary risk-taking. Where we continue to take principal risk, we will only do so when we have proven teams and a clear source of advantage.” – Citigroup CEO Vikram Pandit on January 16, 2009. 
   
Don’t be fooled by Vikram Pandit’s playing the part of a prudent banker.

Instead of scaling back risky hedge fund-style trading, Citi is doing just the opposite. And that raises big questions about why the federal government continues to bail out this basket case of a bank, and why Pandit is allowed to remain at Citi’s helm.

Here’s the scoop on this latest bailout outrage: Citi is planning to commit at least an additional $1 billion in capital to a team of stock-focused proprietary traders, say people with knowledge of these strategies — a move seemingly at odds with Pandit’s earlier vow. 

These traders buy, sell and short a wide variety of stocks, including telecom, technology, healthcare and consumer financials. And the profits and losses on those trades all go straight to Citi’s bottom line. 

Tax Wall Street trades

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Reports of the death of the investment bank have been greatly exaggerated, as Mark Twain might have put it. It was just 10 months ago, after Goldman Sachs and Morgan Stanley quickly converted themselves into bank holding companies, that nearly everyone had written off investment banking. All those predictions about Wall Street firms becoming less profitable and boring places to work seem laughable in light of Goldman’s blowout second-quarter profits and JPMorgan Chase’s equally impressive earnings.

Now all the chatter is about how little things have changed on Wall Street, with trading revenues and fees from underwriting stock deals padding the bottom lines of both banks. Back in September, The New York Times ran a lengthy article headlined “Wall Street, R.I.P.: The End of an Era.”

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