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Pandit backs protection for US consumers

City A.M. Reporter
CITIGROUP chief executive Vikram Pandit yesterday voiced support for key Obama administration financial reform goals, including a consumer protection authority, but government watchdogs questioned his earnestness.

In testimony to a bailout watchdog panel in Congress, 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 US Treasury sent legislative language on the proposal to lawmakers yesterday.

“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 chief executive officer, whose bank is 27 per cent owned by the US government after $45bn 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 Citigroup was becoming “politicised”.

“It’s difficult to avoid the impression that one of the motivations is to curry favor with the hand that feeds it,” said Atkins.

Pandit also blamed short selling rather than financial weakness for the bank’s near collapse in 2008.

“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.