# Pandit Should Learn a Lesson from Reed

1 Opinion December 4, 2011 Financial News ![Roy C. Smith](/sites/default/files/styles/246w/public/assets/images/uat_025572.jpg?itok=Kn4Ckx0s) By Roy Smith, Kenneth Langone Professor of Entrepreneurship and Finance & Professor of Management Practice > Perhaps it is time to spin off the investment bank to shareholders – just as Harvey Golub, a newly appointed chief executive of American Express, did with Shearson Lehman’s troubled investment bank in 1994.

*January 9, 2012*

### Four years ago, in December 2007, less than 12 months after selling his hedge fund to Citigroup for $800m, Vikram Pandit became its chief executive. He replaced Charles Prince, appointed by the board in 2003 after the pressured resignation of Sandy Weill.

Prince, a lawyer and troubleshooter for Weill with little executive or banking experience, was appointed on Weill’s say-so with no search committee. Prince left a mess behind him, into which Pandit was tossed headfirst.

First there were $120bn of write-offs on mortgage and other loans that depleted all of the bank’s capital, forcing the US government to bail it out and become its largest shareholder. Second was the long-running legacy of being what some called a regulatory “serial offender”, and a defendant in a seemingly endless stream of litigation alleging fraud, misconduct and predatory activity.

The first destroyed Citigroup’s aggressive, take-no-prisoners business model, once feared and admired as the most powerful in the banking industry, and the second shattered its once-brilliant reputation and brand.

Read full article as published in [*Financial News*](http://www.efinancialnews.com/story/2012-01-09/pandit-lesson-from-reed?mod=otherarticles_article). ###  More Opinions from Roy Smith

- ["Sanity Needed When Punishing Finance Misdeeds," 12.2.13](/node/7830)
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- ["Make No Mistake, Size Matters with Systemic Risk," 5.6.13](/node/6678)
- ["Prosecutors Need Lessons in Spotting a Financial Avalanche," 2.11.13](/node/6570)
- ["The Ideal Christmas Gift for Mark Carney," 12.17.12](/node/6269)
- ["Wall Street Survives One Storm But Now Faces Another," 11.12.12](/node/6103)
- ["At last, Citi’s board takes over," 10.18.12](/node/5986)
- ["Dodd-Frank will test both Romney and Obama," 10.8.12](/node/5936)
- ["Barclays must address the strategic dilemma," 8.13.12](/node/5906)
- ["Time for Europe-wide FDIC Fund – and Quick," 6.18.12](/node/5770)
- ["Shadowland Will Take Care of JP Morgan," 5.28.12](/node/5585)
- ["Once and Future Investment Banks," 5.4.12](/node/5505)
- ["S-factor Spotlights Banks’ High Systemic Risk," 4.16.12](/node/5369)
- ["Bold Action Needed Over Bank of America," 3.5.12](/node/5313)
- ["Pandit Should Learn a Lesson from Reed," 1.9.12](http://www.stern.nyu.edu/experience-stern/faculty-research/roy-smith-pandit-reed)
- ["Careful Where You Cut, a Bonanza Awaits," 11.14.11](http://www.stern.nyu.edu/experience-stern/faculty-research/smith-careful-where-you-cut)
- ["Dimon’s Bank Can Ride a Storm of Rules," 10.17.11 ](/node/3975)
- ["Break Up the Banks, Even Goldman," 9.5.11](/node/3976)
- ["Dodd-Frank Shows Teeth on First Birthday," 7.4.11](/node/44874)