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The End of Citigroup's Wild Kingdom


What comes after the financial-services supermarket.

This past week, along with reports of the announced sale of Smith Barney and the splitting of Citigroup (C), I have read obituary after obituary reporting the death of the financial supermarket.

As someone whose career in financial services took place alongside the growth of what ultimately morphed into Citigroup, I don't think "supermarket: quite characterizes the organization. No, for me, Citigroup will always be the "Wild Kingdom."

Admittedly, I'm dating myself: But what Sandy Weil and Jamie Dimon built looks a whole lot more like a season of Mutual of Omaha's Wild Kingdom than the annual report from Kroger. With Sandy in the role of Marlin Perkins and Jamie playing his alligator-wrestling assistant, Jim, week after week, these 2 went game-hunting. Every morning, coming out of his spotless white canvas tent as the sun rose in the east, Sandy would survey the plains looking for weak animals; then he'd pursue them with the skill and tirelessness of a big-game hunter until he claimed his kill.

After the cameras had recorded his often bloody victory, Sandy would go back to his tent for a dry martini while Jamie eviscerated the prize, taking out bloated expense after bloated expense. Don't get me wrong: Like Marlin and Jim, they did it extremely well. But let's call it what it really was - big-game hunting.

Unfortunately, once you've killed the proverbial white rhino, (and forever changed banking regulation in the process), there isn't a whole lot more hunting to do. And to me, that's when Citi truly began to hit the skids. Suggesting all these businesses could somehow be integrated was about as likely as cheetahs and tigers getting together for a conga line on the savannah.

Cross-selling was to be the holy grail for financial services: The idea that all these businesses, taken together, could deliver everything a consumer or corporation desired. That it was possible to be both general practitioner and surgeon. Manufacturer and distributor, Best Buy and the Apple Store.

But to accomplish this, banks spent more and more time focused on trying to cut the pie into more pieces, versus looking for more pies. Hours, days, weeks and months were spent negotiating and renegotiating fee-sharing agreements. Shadow P&L's (double and tripling the counting of the same dollar of revenue) mushroomed. And team-building took precedence over client building.

Human nature being what it is, the reality never changed: Everyone wanted to be the dog, no one the tail.

Which brings us to today. The model failed. And now it's being dismantled. Citi's holdings will be filled with whatever dead carcasses they can find and then offloaded (at the government's expense) to the financial hyenas - who will then sift through the bones and pick clean any bits of meat that remain.

The living animals will be housed in Citigroup. But anyone who thinks these will be run as a long-term cohesive business is sorely mistaken. What we now have in Citigroup is a circus that's going out of business. And from where I sit, each of these businesses will ultimately be sold to someone who can take out the enormous savings savings that come from real business synergies - like what I see coming from the merger of Smith Barney and Morgan Stanley (MS).

Though the pendulum once swung from monoline to supermarket, it's now swinging back at full speed. And I, for one, find all of this just a tad ironic: History's repeating yet again. From the failure of MBank came FirstUSA. From the failure of Maryland National Bank came MBNA. From the failure of Signet, Capital One, and, perhaps, of Citigroup will come another great business.

As my kids would sing, "It's the circle of life."

Just like on Wild Kingdom.
Position in SPY options and JPM debt obligations
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