Intuitive Business Decisions Could Get You Fired. Welcome To The Mortgage Business

It was on August 29, 2005 that I took my first cheap shot at the now fired CEO of Citi, after I had read a PR-type article in the American Banker. This was the shot: Mr. Prince says, with surprise, "Citibank can't put together four accounts of a retail customer." Even a rookie in today's bank tech world has to ask, is the year 1965? I believe the next operating committee meeting at Citibank might well begin with, "This is not about insurance, brokerage or other financial services. This is about banking. Is there a banker in this room who can lead the discussion?"Some time after that I thought it was strange that Citibank was about to spend billions to change its name to Citi. Was that the solution to some kind of hidden hint that sub prime mortgages were about to hit the fan? Just think if the U.S. leadership, for example, used intuition rather than rock-solid intel and analysis from the CIA before going to war in Iraq. Oops, I voted for the man. The last time I had something to say about Citi was in a blog - "Don't get rid of the lawyer. Citi may need a good one or dozens to ward off litigious stockholders."

How is it that one bad business decision in a huge organization can almost destroy it? The answer to my own question is, the lack of internal "regulators" aka "no-men." In the case of Citi, I wonder how many yes-men applauded the idea of sub prime mortgages. I wonder how many of them were fired. In other words, CEOs don't know everything, and they're only as good as their team.

Look at the other two banks in the Big Three. BofA doesn't have any sub prime mortgages, but that bank took a hit because as Ken Lewis put it, he's had all the fun he can stand in investment banking. In the case of Chase, poetic justice plays. Jamie Dimon didn't get the top job at Citi so he went to Bank One and now leads Chase. Maybe Chase will acquire Citi just to set the record straight that Jamie was the right man. After all, Chase hasn't screwed up anything so far. Maybe they use the right computer models based on good old fashioned banking business.

Don't get me wrong. Intuition is a good thing to have when you're running a bank, as long as nothing bad happens on your watch. And this from a guy who knows nothing about running a bank.How is it that one bad business decision in a huge organization can almost destroy it? The answer to my own question is, the lack of internal "regulators" aka "no-men."