With the second presidential debate set to air Tuesday night, it’s fitting that the day should start with the resignation of Citibank chief Vikram Pandit. Five years after the collapse of Lehman Brothers, the bank bailout remains in the center of the political debate.
The departure is a fitting coda to the bailout era. Like just about everyone associated with the bank bailout, Pandit ended up tarred with the detritus of the mess he was brought in to fix.
Pandit walked into a job that made him the poster boy for the bank bailout, and in his tenure at Citibank was never able to shake the bailout stigma. In his first two years he worked for a token salary, he repaid the government (which completed its sale of Citi shares at the end of 2010) and brought most of Citigroup’s units back to profitability. Still, he could never shake the criticism that he was running one of the country’s losingest banks.
Pandit made some major mistakes in his tenure, like betting too heavily on the brokerage business with the Morgan Stanley Smith Barney joint venture. Still, the $4.7 billion charge-off Citi took on that was smaller than JPMorgan Chase’s loss from one terrible derivatives bet.
Ultimately what made Pandit’s position particularly difficult is that the public made little distinction between the officials who led the banks into the crisis and those who were assigned to stumble their way out of it. In her recent book on the bailout, former federal regulator Sheila Bair called Pandit “Bob Rubin’s handpicked choice for CEO.” The new boss, in other words, was the same as the old boss.
Which brings us back, in a roundabout way, to the debate. In politics, a very similar dynamic has played out. Those who oversaw the bailout are perceived as being just as culpable for the economy’s troubles as those who presided over the banking collapse. So just as the president tries to tie Republicans to the failings of the last decade, the Republicans want to tie the Democrats to the unpopular bank bailout.
This may not be fair to either party. Measured by the cost to taxpayers, or by the severity of the downturn compared with other banking crises, the U.S. banking bailout was as successful (read: less painful) a resolution to the banking crisis as anyone could have anticipated. Unfortunately, it’s the kind of success for which no one—not chief executives like Pandit, not the presidential candidates—wants to take credit.