* Pandit voices support for Obama financial reform goals
* Pandit: Bank has scaled back proprietary trading
* US Treasury: no more taxpayer funds for Citi
* Panel member concerned Citi becoming "politicized"
(Adds fresh quotes, background, color from hearing)
By David Lawder
WASHINGTON, March 4 Citigroup Inc (C.N) Chief
Executive Vikram Pandit on Thursday voiced support for key
Obama administration financial reform goals, including a
consumer protection authority, but government watchdogs
questioned his earnestness.
In testimony to a panel that helps police government
bailout efforts, Pandit advocated a watered-down version of a
consumer protection agency proposed by Obama and said banks
generally should not engage in trading for their own profit,
noting that Citigroup has scaled far back on such activity.
However, he stopped short of a full endorsement of the
so-called "Volcker rule", which would explicitly ban banks from
buying and selling investments for their own books unrelated to
customer accounts. The U.S. Treasury sent legislative language
on the proposal to lawmakers on Wednesday.
"Let me be very clear: proprietary trading is not a big
part of our business at all and I don't think banks should be
speculating using banks' capital," Pandit said.
The supportive comments from the Citigroup CEO, whose bank
is 27 percent owned by the U.S. government after $45 billion
worth of bailouts in 2008 and 2009, rang hollow with some panel
members. Paul Atkins, a former member of the Securities and
Exchange Commission, said it appeared that Citigroup was
"It's difficult to avoid the impression that one of the
motivations is to curry favor with the hand that feeds it,"
said Atkins, who was appointed to the SEC by former President
George W. Bush.
NO MORE MONEY
But a smiling Pandit appeared relaxed and confident through
a less-than-heated grilling in which he declared that Citigroup
no longer needs government funds. All of Citi's businesses were
solvent, he said, adding that he was focused on profitability
and supporting his clients.
"Taxpayers still hold 27 percent of our common stock and we
look forward to helping them make money on that investment," he
The government stepped in to prop up Citigroup at the
height of the financial crisis in October 2008 when officials
at the U.S. Treasury feared the bank's crumbling financial
condition could destabilize financial markets worldwide.
Pandit suggested that Citigroup needed an additional
bailout just weeks after it received an initial $25 billion in
taxpayer funds not because of financial weakness, but because
markets were attacking it.
"A lot of that was driven by short sellers. Short sellers
started selling stock, the stock price went down, and when it
hits that point, perceptions become reality," he said.
The U.S. Treasury's top bailout official, assistant
secretary Herbert Allison, said the government has "no plans
whatsoever to make further investments in Citigroup."
TREASURY: CITI BAILOUT "WARRANTED, NECESSARY"
Allison defended the repeated bailouts as necessary to keep
the financial crisis from worsening.
"Given Citigroup's substantial international presence,
global liquidity pressures would likely have increased and
confidence in U.S. assets more broadly would have declined,"
He said that if the government were to sell its Citigroup
shares at current valuations, taxpayers would earn a profit,
but he did not offer any details on when a sale might occur.
"We wish to dispose of those shares in the public market as
soon as circumstances permit," Allison said.
Earlier on Wednesday, the Treasury said it auctioned off
its warrants in Bank of America (BAC.N) -- its last holdings in
the largest U.S. bank -- for net proceeds of about $1.5
billion. Most of the rest of the largest U.S. bank holding
companies have already repaid their bailout funds.
PROPRIETARY TRADING SCALED BACK
Pandit steered clear of an intense debate in Congress over
whether a new consumer financial protection regulator should be
a stand-alone agency or placed within an existing regulator,
such as the Federal Reserve. But he said it needed to be linked
to banking supervision.
"We support the need for a strong consumer authority that
is part of the regulatory system, to promote greater
transparency, sound practices, growth and stability in the
consumer credit market," he told the panel.
Pandit said he had sold off many proprietary trading
businesses, including the Phibro energy trading unit, and was
focused on trading services for clients.
He repeatedly told the panel that Citi was focused on
back-to-basics banking for U.S. corporations worldwide.
"The biggest change I'm making at Citi is to develop a
culture of responsible finance. That's the legacy that I want
to leave behind," Pandit said.
(Additional reporting by Karey Wutkowski, Kim Dixon, Glenn
Somerville and Dan Wilchins; Editing by Chizu Nomiyama)