The Shorts Did It!!
Vikram Pandit and Indra Nooyi are the two most prominent executives of Indian origin at Fortune 500 companies. From what I have read, Indra is doing a fantastic job as the CEO of Pepsi. On the other hand, Pandit caught the ‘I am a banker, and therefore I am special!’ bug. Today he was out there testifying in front of the Congressional Oversight Panel headed by Ms. Elezebeth Warren. Here are some excerpts form that testimony (via NY Times):
Ms. Warren, though, took issue with Mr. Pandit’s assertion, saying that except for Citigroup, none of the other big banks that received billions of dollars in government bailout funds “needed money within weeks of the original TARP infusion.”
“The secretary of the Treasury said you were financially healthy and within weeks you needed another $20 billion,” Ms. Warren said. “I just want to understand why Citi is special.”
Mr. Pandit responded with an attack on short-sellers. “This was not a fundamental situation, this was not about the capital we had and this was not about the funding we had at the time,” he said. “A lot of that was driven by short-sellers.”
“Short-sellers started selling stock, the stock started going down, and when it gets to that point, perceptions become a reality,” Mr. Pandit continued.
Ms. Warren shot back: “So this is a ‘not Citi is special, but that Citi had bad luck?,”’ in that it was targeted by short-sellers.
“You know, I don’t mind being special,” Mr. Pandit replied. “And I think we were in the sense that Citi came into this market with assets from which we took a lot of losses.”
But while Mr. Pandit seemed to acquiesce to the fact that short-sellers may have indeed possessed a legitimate reason to sell his bank short, he later went on to again attack their raison d’être.
“There are ways in which fear overtakes the market,” Mr. Pandit said, referring to the market rout in the fall of 2008. “That’s the tool that short-sellers need to make money.”
The Securities and Exchange Commission temporarily banned short-selling of certain financial stocks during the crisis, causing hedge funds to cry foul. The commission later moved to reinstate the “uptick rule,” which would prevent traders from selling a stock short while it was on the downswing.
Oh my! Pandit is blaming the short-sellers for CitiGroup’s problems. Lest you know, he was a hedge fund manager earlier before selling his fund for a nice profit. What is the likelihood that he never sold anything short? An incompetent executive’s standard excuse for his company’s problems are those “evil short-sellers,” just like a rogues last bastion of refuge is always ‘religion.’
CNBS is already talking as if this entire mortgage mess is the cause of some irresponsible borrowers – not that of predatory lending and lax regulation. Given enough time, the idiots like Vikram Pandit and the ‘pandits’ at CNBS will rewrite history and make you want to believe that the economic crisis is complete handiwork of short sellers.
One positive observation from the following video (after his testimony) is that Pandit seems to endorse Volker rule.
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