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Why Citigroup Looks Lucky to Have Pandit

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No one else wants to run a government-controlled entity.

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Many people never thought this day would come. Citigroup's (C) employees and shareholders -- and by definition, taxpayers -- are fortunate to have Vikram Pandit at the helm of the struggling bank.

After all, without him they might have no one.

That's the predicament that Bank of America (BAC) finds itself in after CEO Ken Lewis's surprise announcement in September that he plans to step down by the end of this year. The board had hoped to announce his replacement by Thanksgiving, but it looks like that deadline might come and go, the Financial Times notes today.

It seems no one wants the job. Several internal candidates may still be under consideration, but the bank's attempts to reach outside of its offices for top talent have so far failed.

Among the executives who have been approached about the job but haven't expressed interest, according to the Financial Times, are: Robert Kelly, chief executive of Bank of New York Mellon (BNY), Bob Diamond, chief executive of Barclays Capital (BCS), Charles Scharf, head of retail banking at JPMorgan Chase (JPM), and Michael O'Neill, a Citigroup board member. News came this morning that outgoing New Jersey governor and former Goldman Sachs (GS) CEO Jon Corzine might be in the running for the job.

Bank of America isn't the only recipient of government bailout funds to face difficulties in the corner office. Bob Benmosche, newest CEO of the government-controlled insurance giant AIG (AIG), reportedly told the company's board that he wanted to quit because of the Fed's tight controls over compensation. He later told employees he was committed to the job.

Really, who can blame him for his frustration?

Benmosche, at least, is still collecting a nice pay package worth about $10.5 million, including $3 million in cash, for his troubles. (Not that he needs it -- he spent the first month on the job working from his palatial Croatian vacation home). Pandit has agreed to forgo a bonus and earn a $1 salary until the bank returns to profitability. It's unknown what Bank of America is offering for its top spot, but any deal will almost certainly have conditions attached.

The government is aware of the problem it's created, but it's not clear if it knows how to solve it. Taxpayers are rightfully outraged by Wall Street's compensation, but they'll never get a return on their money if the most talented bankers leave.

"I'm very cognizant of the concerns expressed by these companies," said Kenneth Feinberg, the Obama administration's pay czar, at a conference Thursday. "The determinations I render are designed, first and foremost, to make sure those companies thrive and that the taxpayers get their money back."

Feinberg has fielded criticism from both sides on the issue. He's charged with the thankless task of offending everyone and pleasing no one.

As all this chatter reaches new heights, though, Citigroup's Pandit continues to quietly work away, without throwing boardroom tantrums or overt public complaints. The bank is, without a doubt, eager to come out from under the government's control. In the past year, Pandit has sold off many units of the "too big to fail" institution in an attempt to become a more nimble and focused bank.

He's got a long way to go, and it's not even clear yet that Pandit will ultimately be the one to lead Citigroup to safe waters. But for a man who faced almost relentlessly harsh criticism from the moment he took the job as Citigroup CEO in December 2007, Pandit has made mistakes but persevered.

Is he the best person to lead Citigroup right now? That's a question we may never be able to answer. But for Citigroup shareholders, it's best right now to avoid trying to find out.
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No positions in stocks mentioned.
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