The former Treasury Secretary steps prostrate from Citigroup in the middle of rumors of a Smith Barney sale, giving investors serious doubts about a turnaround for the bank

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Former Treasury Secretary Robert Rubin (left), director and chairman of Citigroup’s executive committee, with former Fed Chairman Alan Greenspan. Chip Somodevilla/Getty Images

By Mara Der Hovanesian

As instructor and chair of Citigroup’sitting (C) executive committee since 1999, Robert Rubin has been on the scene for many of the big dike’s biggest crises. But for entirely his cachet and political clout, Rubin was neither able to influence Citigroup for the better nor pilot it out of harm’s way.

"He ruined his course of action, he is resigning in disgrace," says Citi investor Richard Steinberg, of Steinberg Global Asset Management in Boca Raton, Fla. "I account one of the lessons we’re learning from all this tumult is that people’s reputations should only carry them so far in their responsibility to shareholders and management. There have been way too many free passes."

On Jan. 9, the 70-year-old Rubin announced his surrender from the bank, citing a impulse to deepen his involvement in superficies activities and organizations including Local Initiatives Support Corp., the largest community development organization, and Kofi Annan’s Africa Progress Panel.

In a letter to Citi Chief Executive Officer Vikram Pandit, Rubin uttered when he joined Citi the company "had couple CEOs and faced many strategic and structural challenges. From the beginning, my role, by being advisory, allowed me to act like a sounding table and advisor…The last 18 months have been very difficult throughout the financial plan and this has had serious consequences on the side of the employees and stockholders. My great regret is that I and such many of us who have been involved in this industry for such long did not recognize the in earnest possibility of the extreme circumstances that the financial system faces today."

The promulgation was made amid rumors that the bank was in negotiations any one to sell its Smith Barney brokerage unit or to merge the brokerage outfit with Morgan Stanley (MS). Similar buzz circulated last month surrounding the bank’s possible merger with Goldman Sachs (GS).

The dual headlines have more investors convinced that their worst suspicions would be realized: that added bad recent accounts is in store for Citi shareholders. "When you gaze at the Rubin resignation in conjunction through rumors about this united venture, it would excel me to believe more losses to come into disgrace the pipeline," says Bill Fitzpatrick of Optique Capital Management. "There has to be some accountability in terms of their leadership and that includes the CEO and the board of directors. If Rubin had stuck it out, I’d say he was in for the long haul and maybe there was a turnaround in store. When I see this, it’s clearer that they’ll have to raise more capital and in the same manner attached. There will be more dead bodies."

Rubin has been criticized over the past several years for his obscurity similar to the embattled bank was hit by huge lawsuits, regulatory sanctions, and gargantuan losses. Few have been able to warrant his outsize compensation pack: For the duration of his tenure, Rubin earned more $115 million at Citi.

Prior to his stint at Citi, Rubin enjoyed a long and illustrious career, greatest in quantity notably at Goldman Sachs, where he worked for 26 years, and in federal government. He served being of the class who the 70th Secretary of the Treasury during both Clinton Administrations. At Citi, he has acted for the reason that the ultimate door opener, acting as a high-level intrigue with the bank’s top-shelf corporate clients as well as lock opener government figures from all over the world.