Life was grand for Sandy Weill. With John Reed vanquished, Sandy, at sixty-seven years old, was everything he had ever yearned to be: sole head of the world’s largest financial empire, an industry innovator, sage, and diplomat. “Elder statesman” would have been an appropriate term, but it implied he might soon be put out to pasture. And Sandy Weill had no intention of going anywhere now that he was reaping the rewards and respect he had spent his life seeking.
When Louis Rukeyser hosted a live broadcast of the thirtieth anniversary of his PBS show Wall Street Week, he hailed Sandy, who broke out in a terrible sweat on air, as the “most important figure in modern finance.” When world-renowned chef Alain Ducasse opened his new, hugely expensive Manhattan gourmet restaurant, he emerged from the kitchen to personally welcome Sandy and his guests. And when President George W. Bush wanted to consult with the nation’s corporate leaders, Sandy was invited to the White House.
Sandy’s employees treated him as something of a deity, and their boss indulged them. The Primerica unit commissioned a nearly life-sized oil painting of Sandy and Joan, an expense Sandy never would have permitted back in the lean days when cost cutting was his paramount mission. When it was unveiled at a black-tie gathering of Primerica executives and agents, the flattered chairman was awestruck. “I never had a picture before,” he marveled, gazing blissfully at the artwork.
“Portrait,” Joan corrected him.
“Every time I became chairman of a company, we stopped doing portraits,” Sandy quipped.
His exalted position atop Citicorp attracted other honors, especially from the city’s nonprofit institutions that were eager to tap his fame and his company’s deep pockets. At the annual fund-raiser for New York’s public-radio station WNYC in November 2000, Sandy was honored along with Sarah Jessica Parker, the sultry star of the HBO hit television series Sex and the City. Sandy had never heard of the young star or the sizzling show, but that didn’t matter. He arrived so early that only the waiters and a few guests were milling around. Citigroup had bought two tables at $25,000 each, and the Salomon Smith Barney unit bought a third.
As more guests arrived, Sandy and Joan took their places to receive homage. “Good evening, your lordship,” said New York schools chancellor Harold Levy, a former Citibank executive, to Sandy’s obvious pleasure.
For some socialites unfamiliar with the corporate world, the event offered a first glimpse of the now-legendary chief executive. “He’s short and fat,” one impeccably dressed, ultrathin society matron intoned. “That’s the banking tycoon?”
Sandy indulged himself, as well. One day Heidi Miller, who had left Citigroup when it was mired in the conflict between Reed and Sandy, attended an insurance meeting at Citigroup’s conference center in Armonk, where she had spent many a planning group session as an executive at Travelers and then Citigroup. She was surprised to find a new, much larger building near the three original structures. When she walked in the massive front door, she burst out laughing. There stood a huge, three-story stone fireplace. She could have walked into the cavernous firebox. That’s got to be Sandy, she thought, chuckling. “What a phallic symbol,” she whispered to the only other woman at the business meeting. “Size counts!”
Sandy also moved swiftly to improve Citigroup’s cuisine. Reed, who didn’t eat or drink much, had paid little attention to the food served in the executive dining rooms, but that wasn’t Sandy’s style. Indeed, many Citibankers joked that the best part of Sandy’s reign was that the food in the dining rooms went from dreadful to delicious. The unappetizing blobs of cottage cheese on lettuce leaf disappeared, replaced by elegant salads of arugula, aged cheese, toasted walnuts, and radicchio.
Sandy supervised the renovation of nearly half an entire floor at Citigroup’s Park Avenue offices to create a suite of about a dozen private dining rooms, a new boardroom, a gourmet kitchen, and a host station where reservations were maintained and visitors escorted to their meetings with Citigroup executives. A new menu was prepared for each meal, offering at least six choices. In the elegant modern wood-paneled dining rooms, tables were set with expensive china, linen place mats, and vases filled with fresh roses. Sandy’s private dining room—the grandest one, in the corner—had a separate seating area, bar, and private staff entrance. The only other executive with access to it was Bob Rubin—and then only if Sandy was traveling.
At times it seemed almost too good to be true. “I wake up every morning and pinch my ear to make sure I’m not dreaming,” Sandy unabashedly told a group of business colleagues.
Still, not everything was perfect. In July 2000, Sandy abruptly told the Citigroup board that his son, Marc, chief of the firm’s $113-billion investment portfolio, was leaving the company. Sandy told the board that his forty-four-year-old son would be replaced, and then he moved on to the next topic on the agenda with no further explanation. Rumors had swirled for months about Marc, who had been acting erratically, especially in business situations, and dozing through meetings. Sandy generally turned away any inquiries about Marc, even from close friends. Months later, The Wall Street Journal reported that Marc Weill had left his $2-million-a-year job amid a battle with cocaine dependency, and the New York Post gossip column chronicled Marc’s active nightlife under the headline CITI HONCHO’S SON AND PORN QUEEN.
For all his successes, though, Sandy remained awed by how far he’d come, displaying an endearing wonderment along with his oversized ego. His corner office reflected his need to show off both his increased prominence and his humble start. As the awards, honorary doctorates, and magazine covers proliferated going into 2001, Sandy carefully arranged the trophies, framed certificates, and covers on the shelves along the two walls of windows overlooking Park Avenue and Fifty-third Street. Gag gifts, such as the “Weill-opoly” board—“for advanced players only” with every square representing a deal—were relegated to the walls of his private bathroom.
At the same time, the large framed photograph of his modest Brooklyn boyhood home, shared with his grandparents and another family, occupied a prominent wall in his seating area. He liked reminding himself—and others—of how far he had climbed. Early family photos, still in the original cheap plastic frames, shared space with the tattered fake-leather scrapbooks of his early career, many missing their labels. His favorite perch, his leather tufted sofa, was peeling and cracked in numerous spots.
Even Citigroup’s competitors were paying him tribute, albeit not directly. J.P. Morgan, which had rejected Sandy’s overtures to merge three years earlier, and Chase Manhattan Bank—until Citigroup’s formation, the largest bank in the nation—were both fiercely independent. Yet in the fall of 2001, they merged in a tacit admission that neither could survive long term against the financial-services juggernaut that Sandy had created.
Merging Citicorp with Travelers may have been the “mother of all deals,” but it certainly wasn’t the end of all deals. Firmly ensconced as Citigroup’s CEO, Sandy once again began indulging his passion for acquisitions. Deryck Maughan, who had been kicked upstairs and put in charge of acquisitions as a result of his ballroom brawl with Jamie Dimon, quickly discovered just how important his new post was. Together, he and Sandy oversaw dozens of acquisitions in 2000 and 2001, ranging from the minor purchase of a $100-million credit-card portfolio auctioned off by a small bank, to the $31-billion acquisition of Associates First Capital, the biggest consumer-finance company in the United States and a deal that, for Sandy, was second in size only to Citicorp.
Ever since Sandy had jump-started his stalled career by buying dowdy little Commercial Credit Corp., he had nurtured a fondness for the reliable if unglamorous business of lending at high rates to customers most banks wouldn’t let in the door. Associates, which had been founded in 1918 as part of Ford Motor Co. to help people finance the purchase of Model Ts, had long been a vexing challenge to Sandy and his Commercial Credit team. Every time they wanted to buy a smaller lender, they found themselves bidding against Associates. When Ford spun off Associates in 1998, Sandy put it on a target list of possible acquisition candidates. In late August 2000, after a dinner with Associates chairman Keith Hughes, Sandy had the makings of a deal. A really big deal.
Sandy quickly tracked down Bob Willumstad at his weekend house in Vermont and told him to start due diligence on Associates. Willumstad, who had planned to spend the Labor Day weekend in Vermont, told Sandy he would get right on it when he returned to the office on Tuesday, the day after Labor Day.
“No! No! No!” Sandy screamed. “I want to take it to the board on Tuesday. Start Friday and work through the weekend.”
On his way back to New York for a weekend of wading through financial documents, Willumstad mused that even though Sandy was now the king of the financial empire, he was still obsessed with deals and with doing them at “Sandy deal speed.” The Citigroup CEO called Willumstad several times each day, as if the deal were a patient in intensive care, Willumstad thought. The patient pulled through. Citigroup announced the all-stock acquisition of Associates the next week.
But Willumstad’s due diligence had turned up a problem. The largest player in the business of making loans to people with poor credit histories, Associates had long been under attack from consumer advocates and state regulators angered by what they considered the company’s high-pressure and misleading tactics. Sandy and Willumstad figured that Citigroup’s reputation for fair business practices would earn Associates a reprieve from such attacks. But they figured wrong. Suddenly, the vocal critics who had labored to bring an obscure outfit called Associates to heel found themselves with a much, much bigger target, a target with a name everyone knew: Citigroup. Suddenly Citigroup was being accused often and loudly of predatory lending.
Taken by surprise, Willumstad and Marge Magner scrambled to fix the problem. They suspended business relations with 3,600 independent brokers of subprime mortgage loans—about 60 percent of Associates’ contractors—for having inadequate licenses, using questionable tactics, or failing to sign a code of conduct. But that wasn’t enough.
The critics shifted the focus of their criticism to one of Associates’ most lucrative products: single-premium credit insurance for home owners. Basically a mortgage-insurance product for home owners who might lose their jobs, Associates was minting money off single-premium credit insurance policies. Not only did it charge far more than the product was worth, but it also convinced new home buyers to amortize the cost of the premium over the life of the loan, a huge cost to the borrowers and one that often put the new home owners in default within a few years of their purchase. Even politicians maligned the product and scheduled a Capitol Hill hearing to investigate and publicize the problem. Now fully aware that Citigroup’s big name and deep pockets made it an extremely attractive target, Willumstad and general counsel Prince flew to Washington. They told lawmakers that Citigroup would drop single-premium insurance. The decisive action headed off the hearing, but soon the Federal Trade Commission began an investigation into the product. Certainly the problems that Citigroup had blithely assumed would disappear once it took over Associates had made the acquisition much more costly than originally intended. But it had removed the biggest competitor in the consumer-finance arena and in that sense was well worth the price.
As acquisitive as ever, Sandy still wasn’t going to pursue anything and everything. When American General Corp., a Houston-based life insurer, was put on the block, Deryck Maughan thought it attractive enough to present to an Armonk meeting of senior executives as a possible target. The Citigroup executives knew that American International Group, the insurance giant, was also sniffing around American General. AIG’s strong-willed chairman and CEO, Maurice Greenberg, had been a friendly rival of Sandy’s for years. After a lengthy discussion of the merits of American General, Sandy went around the table one last time to decide whether to offer the $20 billion or more it would take to win the bidding against AIG.
“We can make it work,” said one executive. “It would be interesting,” said another.
“It can’t just be a good idea,” Sandy warned. “Good execution is just as important.” He looked at the gathered executives and sensed that none of them really wanted to run American General. Maughan knew that Sandy backed people, as well as ideas, and clearly no one wanted to “take ownership” of the project hook, line, and sinker.
“We’ll pass,” Sandy concluded. Within weeks, AIG announced that it would pay $23 billion for American General.
Citigroup didn’t have to seek out deals. In many cases, the deals were brought to the company. As the first financial firm to hit $1 trillion in assets, Citigroup was the eight-hundred-pound gorilla of global finance. Any financial company anywhere in the world that wanted to sell knew it was a deal-making machine.
When the Polish government called Citigroup to solicit a bid for its Bank Handlowy, which was being privatized and had been targeted as an acquisition by another foreign bank, Sandy traveled to the country from which his parents had emigrated many years earlier. The country’s president, Aleksander Kwasniewski, welcomed the global financier almost as a native son. Sandy’s Eastern European heritage might have been a huge hurdle to his early career on Wall Street, but here it made negotiating a deal easy. Citigroup bought Bank Handlowy for $1.2 billion.
Acknowledging to his joking executives that the biggest move he had ever made was from Brooklyn to Manhattan, Sandy clearly relished the idea of “going global” in a big way. For his sixty-eighth birthday in 2001, his lieutenants gave him a handheld computer that, with the push of a button, could spit out sentences in different languages. It was already programmed in every available language: “Hi, I’m Sandy Weill, and I want to buy your company.”
Citigroup eagerly snapped up foreign targets, including credit-card portfolios in Britain and Canada and a stake in Fubon Group, a Taiwanese financial firm. But what really attracted Sandy were the emerging markets of the world, countries that in Citigroup parlance were “underbanked” and thus ripe for growth. Sandy and his management brainstormed to select five or so key target nations in which to build market share. Mexico emerged at the top of the list, not only because of the North American Free Trade Agreement, but also because of the rapidly growing Hispanic population in the United States.
Almost coincidentally with the decision to focus on Mexico, Bob Rubin one day strolled down the short hall to Sandy’s office and laconically mentioned that “I just got a kind of interesting call.” The former Treasury secretary, who had spearheaded a $40-billion bailout of a crisis-racked Mexico six years earlier, had just had a call from his old firm, Goldman Sachs. Roberto Hernandez, Mexico’s most prominent banker, wanted to know if Citigroup was interested in talking about a merger with his bank, Grupo Financiero Banamex, represented by Goldman.
“That sounds terrific,” Sandy said, almost salivating at the thought of teaming up with a bank that had a whopping quarter share of Mexico’s market.
“I’ll call Hernandez and see if he wants to meet us,” Rubin said.
“Tell him we can be in Mexico City tomorrow night,” Sandy pushed.
The Mexican bankers didn’t like that idea at all. They felt that Rubin, who had such a high profile in the country’s crisis in the mid-1990s, would be recognized and sink the deal before it could be formalized. The talks had to be highly secretive; any hint of selling a national bank to “gringos” would be politically explosive in Mexico. Hernandez, Banamex’s billionaire chief executive, suggested they meet the next evening deep in the Yucatán jungle at Hacienda San Jose, his family’s elegantly restored small hotel.
Sandy and Rubin left without telling anyone else at Citigroup where they were going. In Mexico, they boarded a helicopter for Mérida, a scenic colonial city in the north of the Yucatán peninsula. Under the cover of darkness, the pair landed on ground that had been quickly cleared of the thick jungle brush. Emerging under the chopper’s beating blades, the Citigroup executives were surrounded by guards armed with machine guns. Once inside the hacienda, Sandy and Rubin spent the evening with Hernandez and Manuel Medina-Mora, the chief executive of Banamex’s holding company.
By the time the Citigroup executives left the next morning, the men had found they had a lot in common and began serious negotiations. After quick due diligence, Sandy closeted the Mexican bankers at Armonk to agree on terms.
“Look, Roberto, rather than sit here and go back and forth, let me just tell you what works,” Sandy said after meeting only for an hour or so. The Citigroup CEO preferred getting to the bottom line quickly rather than posturing. “We think this is fair and this is the right number. Hopefully you will find that acceptable.”
Hernandez phoned his partners in Mexico. After minor tinkering, they agreed that Citigroup would buy Mexico’s second-largest bank for $12.5 billion and give Hernandez and another Banamex official seats on the conglomerate’s board. “This speaks to how important that business is,” Sandy said. As a concession to the Mexicans, Sandy agreed that he would not sell Banamex’s palace headquarters or its historic trove of Mexican art—something he normally would have put on the block in a heartbeat.
The acquisition was hailed in the United States as a brilliant move into America’s most important emerging market, making Citigroup the largest bank in a country that remained severely lacking in financial services for the average citizen. But Sandy showed just how shrewd the move was. “This isn’t just about growth of the Mexican market but the fast growth of the Hispanic population in the U.S.,” he told reporters at the deal’s announcement in May.
But the reception wasn’t so warm in Mexico. Critics complained that their country’s banks were becoming branch offices for foreign firms. The Banamex acquisition represented the biggest foreign investment ever in Mexico. Within a week after Banamex’s sale to Citigroup, bombs exploded in branches in protest.
Sandy was in fine form when he presided at Citigroup’s annual meeting that spring. A fanatic about punctuality, he appeared on stage at Carnegie Hall several minutes early, when the first two rows of seats—reserved for Citigroup’s directors—were empty. As the throngs of shareholders took their seats, Sandy quipped to the crowd, “As soon as we find our board, we’ll start. Anyone seen them?” His hands clasped across his ample stomach, he was able to shed some of his anxiety over public speaking by tossing off one-liners. When the high-profile directors filed in, Sandy joked, “I was beginning to think you mutinied.”
After his glowing state-of-the-corporation speech, Sandy opened the floor to shareholder questions. After routine inquiries from various shareholders, Dr. Clinton Weiman, the former medical director of the predecessor Citibank, stood. He wanted to know the state of the sixty-eight-year-old CEO’s succession plans and his health. Avoiding the issue of succession, Sandy went straight to his health.
“I’m in good shape,” he said, then quickly added, in acknowledgment of his obvious girth, “though it doesn’t look like it.” Then he began reeling off his vital signs: “My blood pressure is 128 over 80. That’s good. My cholesterol is 183, and my good cholesterol is 68.”
“That’s good,” agreed the startled physician shareholder.
“I have no lung problems,” Sandy continued, alluding to past indulgence of cigars. Then he formed a thumb-and-finger circle and boldly announced his prostate specific antigen reading: “And my prostate number is close to zero.”
“I didn’t ask that question,” Weiman observed amid the giggling shareholders. Still the doctor persisted about Sandy’s successor.
Suddenly Sandy’s genial expansiveness disappeared. “We have a dialogue between myself and the board of directors about succession,” he said, adding only that Citigroup had a cadre of good leaders. In a dig at GE chairman Jack Welch, Sandy said he had no plans to set up a beauty contest among his senior executives, the sort of contest that at GE had resulted in the loss of several excellent executives when they were passed over for the top spot. “Our goal is not to create battles between people. We intend to do this in a quiet, appropriate way.”
Suddenly an older lady resplendent in a red hat made her way to the microphone. “Thank you for being the best possible CEO, and please don’t be in any hurry to look for someone to take your place.” Grinning, Sandy blew her a kiss and happily called the meeting to an end.
Behind the scenes, however, the two directors charged with pursuing succession, Franklin Thomas and Andrall Pearson, were pushing Sandy to expand the responsibilities of executives he thought showed promise. With his longtime lieutenants Bob Lipp and Jamie Dimon gone, the Citigroup CEO reached into the next layer of senior management.
Using his prestigious membership at the famed Augusta National, Sandy invited Lipp, Bob Willumstad, and Jay Fishman to join him for a weekend of golf. After playing two rounds on Saturday, the men returned to the cabin to change for dinner and have drinks. As Sandy sipped his martini and the others drank wine, Sandy told them that Lipp’s retirement meant he needed more help. Turning to the fifty-three-year-old Willumstad, he said, “Basically you’ll take over Bob’s responsibilities on consumer banking.” Upon the forty-eight-year-old Fishman, who was running Travelers, he bestowed new responsibilities at the parent company, naming him chief operating officer. General counsel Chuck Prince would also be elevated as another COO. Without saying anything about succession, Sandy ushered them to the clubhouse for dinner.
A beaming Sandy was given his kelly-green member jacket when they entered. He immediately ordered a bottle of fine wine, and then another—this time a much larger magnum—which the four finished off with their rare steaks. Back at their cottage, Sandy and his colleagues shed their coats, ties, and shoes and stayed up past midnight drinking and talking about how to run the vast empire of Citigroup.
But just as Sandy was promoting some longtime aides, others were leaving to join Jamie Dimon, whose non-compete agreement was expiring. Even before Sandy and Dimon had “made up” at Christmas, the new Bank One CEO had hired several high-level Citigroup executives. Dimon had been forbidden under his severance agreement from soliciting Citigroup executives, but he couldn’t stop them from coming to him to offer their services. Very soon after Dimon’s appointment as CEO of Bank One, Michael Cavanagh, Charles Scharf, and Jim Boshart—Dimon’s closest friends at Salomon Smith Barney—moved to Chicago for prominent positions. Even an original Citicorp executive, retail-banking chief Bill Campbell, joined Bank One as a consultant.
Although Sandy and Dimon had renewed their friendship, Jamie’s parents, Ted and Themis Dimon, remained steadfastly aloof from the Weills, still resentful over Sandy’s treatment of their talented son. Since Sandy’s and Dimon’s make-up lunch at the Four Seasons, the two had gotten together a few times more for drinks when Dimon was in New York. At one of those occasions, Sandy made what was for him an uncharacteristic first move to mend the hard feelings with the Dimons. He told his onetime deputy how much Joan missed Dimon’s mother.
The next night, Dimon, still in Manhattan, had dinner with his parents. His mother confided to him, “I miss Joan.”
“So, Mom, start seeing her again,” Dimon responded, knowing that Joan would be receptive. He had never told his parents to break off their long friendship with the Weills. Now Dimon decided to help the healing process and phoned Joan the following day.
“I want you to know that my mother misses you,” Dimon began. “If Sandy and I can make up, it’s probably just as easy for anyone else to make up.”
Soon Joan and Themis Dimon exchanged letters and had lunch as they sought to become the friends they once had been to each other. By mid-2001, the women persuaded their husbands to have dinner with them.
As the freeze between the Weills and Dimons thawed, Sandy also began to accept that some of his executives would want to join Dimon at Bank One. When the first round of executives followed Dimon to the nation’s fifth-largest banking holding company, Sandy had blown up and let his competitor know it. Telling an intermediary because the pair weren’t speaking at the time, Sandy had warned: “CEOs don’t behave like that.” By the summer of 2001, when Dimon took the initiative of dipping into the Citigroup talent pool, Sandy held his fire, even as the talent drain prompted observers to dub Bank One “Citi West.”
The first huge jetliner slammed into the north tower of the World Trade Center at 8:45 A.M. The second smashed into the south tower at 9:03 A.M. Within minutes of that second strike, Citigroup officials were ordering the mass evacuation of some 16,000 employees from a dozen sites in Lower Manhattan. By 10:30 A.M. both World Trade Center towers were nothing more than smoldering ruins. Nearly 3,000 people were dead. All of the Citigroup employees evacuated from neighboring buildings escaped safely; six Citigroup employees making calls at the World Trade Center that morning died. Later that day the now-evacuated 7 World Trade Center, a building in which Citigroup occupied 39 of 47 floors, collapsed, the result of damage from the fall of the Trade Center towers.
The horrific attacks struck hard at the nation’s financial markets. Vital communications systems were severed, forcing the stock, bond, and commodities markets to shut down. In a flurry of phone calls that morning, Citigroup and J.P. Morgan Chase, the nation’s two largest banks, offered chilling field reports to the New York Federal Reserve and the Securities and Exchange Commission. The bank executives described a phenomenon they had never seen before: cash hoarding. Dozens of big companies were trying to draw down their credit lines at banks. At the same time, terrified individuals were lining up to pull cash from ATMs around the country. By 11:30 A.M., the two banks were under siege.
J.P. Morgan, its Lower Manhattan offices undamaged but evacuated, had to tell clients it simply couldn’t execute their requests for drawdowns of cash from their credit lines. Frantic finance executives accused the bank of stonewalling to avoid the unknown risks to the nation’s financial infrastructure in the aftermath of the terrorist attacks. While Citigroup’s downtown offices were empty, too, it was able to quickly shift authority for funding decisions to its offices in midtown New York and in New Jersey and provided the necessary short-term liquidity to its corporate clients who couldn’t use the securities markets or other banks.
Early the next morning American Airlines, whose planes had been used as weapons in the terrorist attacks, wanted to draw down on its $860-million revolving credit facility. J.P. Morgan could not immediately fund its $100-million portion, and other, smaller banks indicated they were in the same predicament. Citigroup, the lead lender on the American Airlines syndicate, funded the entire loan on behalf of the bank group without any assurance of timely reimbursement from the other banks.
Almost immediately after the attacks, Citigroup shifted the responsibility for global consumer services to its offices in London, Chicago, and San Francisco to prevent an interruption of service. On September 12, Travelers Insurance catastrophe-response vans arrived just a few blocks from Ground Zero, processing claims and approving overdraft limits for people hit hard by the attack.
Sandy Weill personally intervened to aid competitors. Like many financial firms, Lehman Brothers Holding Inc. was displaced from its Wall Street–area headquarters and sought office space in midtown, including Citigroup’s Park Avenue building. Because Citigroup had been hurt by the attack, too, its real-estate planners told Lehman CEO Richard Fuld that Citi had to use its extra space to relocate its own professionals.
Fuld decided to pay their boss a visit. “Sandy, this is what I need: five hundred thousand square feet,” Fuld implored the Citi CEO. “Your guys say they don’t have it to spare.”
“We don’t,” Sandy replied, adding that he would nevertheless do anything he could to find the space. Within hours, Sandy gave Fuld 450,000 square feet on seven floors on Park Avenue by reconfiguring Citigroup’s own real-estate plan.
Fuld phoned Sandy with a simple message: “Sandy, I owe you.”
In the terrible days following the attacks, Sandy took steps to help victims and the U.S. government. He announced a $15-million gift from Citigroup to pay for the education of children whose parents, whether workers in the towers or rescuers, died in the attacks. His officials, including former Treasury Secretary Rubin, offered advice to the Treasury Department and FBI on how money flowed around the world, as well as what additional steps could be taken to prevent the financing of terrorism.
A few weeks after the tragedy, Sandy, along with other business leaders, met with President George W. Bush to discuss the economy, which had already been in a slump before September 11. Citigroup had one fifth of the U.S. market for credit-card transactions, and Sandy could provide detailed data on sales volumes, delinquency rates, and other indicators of how the public was reacting. After the meeting, Citigroup continued to supply updates on credit-card data to Treasury Secretary Paul O’Neill.
Amid the overwhelming sorrow of the losses from the September 11 attacks, Sandy had to endure the loss as well of a close personal friend. On September 22, Isaac Stern, the president of Carnegie Hall and the man who had introduced Sandy to the grandeur of classical music, died at eighty-one years of age of complications from heart surgery. Years earlier Stern had reassured a demoralized Sandy, who had just been forced out of American Express, that Carnegie Hall still needed his advice and energy. Now Sandy stood before a packed Carnegie Hall audience to eulogize his friend.
“Welcome to Isaac Stern’s favorite room,” he began. “Isaac loved to say what made Carnegie Hall so special was the spirit of Tchaikovsky, Horowitz, Toscanini, and countless others in these walls. Now Isaac joins those spirits within Carnegie Hall.” Sandy’s were the only words from the stage. The remainder of the tribute came from the instruments of Itzhak Perlman, Emanuel Ax, Yo-Yo Ma, Midori, and other famous musicians who let their performances speak for them.
October didn’t get any better for Sandy. On the Tuesday after Columbus Day, Jay Fishman, whom Sandy had made a co–chief operating officer months earlier to recognize emerging talent at Citigroup, asked to see his boss after the weekly management meeting.
“This is a difficult conversation for me, and I’m certain this is going to surprise you,” Fishman said. “I’ve been offered the job of chairman and CEO of St. Paul Companies, and it’s a remarkable opportunity for me.”
“I’m shocked,” Sandy said. “I’m shocked.”
“I want to go and run my own place—just like you did,” Fishman said, explaining why he would leave his huge job at Citi for a much smaller insurance company based in St. Paul, Minnesota.
“I’m shocked,” Sandy repeated. “I’m shocked.”
Then Fishman, an ambitious executive widely considered to covet Sandy’s job, told his boss that St. Paul wanted to announce his hiring in a couple of days. Sandy’s shock turned to anger. It wasn’t right to give Citigroup so little notice! Fishman pleaded with Sandy to understand: “This isn’t about loyalty but about opportunity.”
After Fishman left his office, Sandy called Bob Willumstad to tell him of Fishman’s plan. “I feel like a stranger by what he has done,” Sandy told Willumstad. Sandy’s only solace came a few days later when press releases from Citigroup and St. Paul announced Fishman’s switch: St. Paul’s stock jumped 9 percent. It was the “Weill premium”—anyone who had risen through the ranks under Sandy Weill had to know how to run a company.
As the end of the year drew near, more problems arose. The nation’s economy sank into recession. The stock market continued to decline as chastened investors surveyed the wreckage of the great bull market of the 1990s and the bursting of the high-tech “bubble” in 2000. Companies, too, that had ridden the stock market mania to huge valuations in the late 1990s were now struggling to survive. And the economic malaise was spreading abroad. Argentina, where Citigroup had a huge presence, was in particularly grave straits.
On December 21, 2001, Argentine president Fernando de la Rúa resigned amid mounting economic turmoil. That caught Sandy’s attention. He began asking his executives—in meetings and in the halls—questions: “Is everything okay? How is Argentina?”
“Argentina will get through this,” he was told.
But when bread riots and antigovernment melees toppled five presidents in December alone, Sandy realized that Citigroup had a real mess on its hands. “I want to know how much I can lose,” the CEO roared in one intense meeting. His emerging-markets executives, led by Victor Menezes, acknowledged that the company would have significant securities losses, unrecoverable loans, and deficits from the peso’s decline against the U.S. dollar after Argentina devalued its currency. Their prediction: $300 million. Executives who had been with Sandy for more years than Menezes, who came from Citibank, knew that the number had better be right. Sandy had a steel-trap mind for numbers; if you promised a number, you sure as hell better deliver.
Closer to home another huge problem suddenly loomed. Enron Corp., the Houston energy firm once touted as the nation’s most innovative company and the world’s biggest buyer and seller of energy, suddenly stood on the brink of collapse, the result of massive fraud and mismanagement. Citigroup had lent Enron large amounts of money and had insured numerous aspects of the company. Worried, Sandy began phoning Chuck Prince each morning with long lists of questions about Enron’s prospects and Citigroup’s exposure. As Enron spun out of control, Bob Rubin, speaking as a banker and ex–Treasury chief concerned about the risks an Enron collapse might pose to markets, called the Treasury Department to see if the Bush administration could help save Enron. No, was the answer. And the fact that he had even asked for government intervention on behalf of a Citigroup client drew widespread criticism of Rubin and the company.
In December, Enron filed for bankruptcy protection, then the largest ever in U.S. history. With thousands of workers laid off, the Enron stock in their retirement portfolios virtually worthless, and company officers acknowledging that the company had overstated its profits for years, the firestorm began. The anger and legal maneuvers were focused on Enron’s executives, under criminal investigation, and Arthur Andersen, the accounting firm that failed to detect the frauds or warn investors or regulators.
Even though Argentina and Enron were huge failures in their own right, Sandy nevertheless was in a position as the year ended to tell analysts and ratings agencies that his model of a global financial supermarket was working. Certainly Citigroup had been hurt by September 11 and by the problems engulfing Argentina and Enron. Nevertheless, Citigroup’s reach and diversity, in geography, clients, and products, had allowed the company to weather the setbacks with little financial damage. In the last quarter, profit rose 36 percent as lending to consumers surged, even after writing off nearly $700 million for Enron’s collapse and Argentina’s default. Convinced by Sandy’s leadership, the depth of management talent at Citigroup, and the company’s business model, Standard & Poor’s and Moody’s upgraded Citigroup’s ratings to one notch below triple-A.
On New Year’s Eve, Sandy and Joan traditionally invited a few couples who were their closest friends to spend the evening with them at their retreat in the Adirondack Mountains of upstate New York. On December 31, 2001, Citigroup directors Arthur Zankel and Ken Bialkin and their wives were there, as usual. A new addition to the group was Chuck Prince, who had become Sandy’s closest confidant inside Citigroup. After Jamie Dimon’s firing, Sandy looked to Prince, whom he had discovered at Commercial Credit, as a sounding board and advisor. Indeed Prince, recently separated from his wife, had intensified his devotion to Sandy and Citigroup. Humorous and intelligent, Prince was so protective of his boss that he would even put his arm around Sandy when they crossed a street.
“I’m glad 2001 is over,” Sandy told the close-knit group as they went around the table reminiscing about the difficult year. “Next year should be a much better year,” the Citigroup CEO cheerfully predicted as he toasted2002.