Citi: The Supermarket That Nearly Collapsed

Explore the rise, fall, and restructuring of Citigroup, from its 1812 origins to its role as the poster child for 'too big to fail.'[INTRO]ALEX: In 1977, a bank in New York made a promise that changed how every person on Earth interacts with their money: they pledged to put an automated teller machine on every single corner of the city. JORDAN: Wait, are you saying one bank basically invented the 24/7 ATM lifestyle? ALEX: Exactly. That bank was Citibank, and they even coined the iconic slogan "The Citi Never Sleeps" to prove it. JORDAN: It’s a great line, but I’ve seen the headlines. That lack of sleep eventually led to some pretty massive financial nightmares, didn't it?ALEX: It absolutely did. Today we’re looking at Citigroup—a bank that grew so big it legally forced the U.S. government to change its laws, only to face a collapse so spectacular it nearly took the global economy down with it.[CHAPTER 1 - Origin]ALEX: To understand the ego of Citigroup, you have to go back to 1812. It started as the City Bank of New York, founded by a group of merchants who immediately began financing the War of 1812 against Great Britain.JORDAN: So they were playing at the highest level of geopolitics from day one? Not exactly a local credit union.ALEX: Not at all. By the early 1900s, under a visionary named Frank Vanderlip, they became the first American bank to open a branch overseas, specifically in Buenos Aires in 1914. Vanderlip boasted that the American dollar would become the international standard, and he used City Bank to make it happen.JORDAN: He was calling the shots for the entire U.S. dollar? That’s some serious confidence.ALEX: It set a pattern of "firsts." They hired the first female officer on Wall Street, Sylvia Porter, in the 30s. They financed the Panama Canal. But the real transformation happened in the 60s and 70s under CEO Walter Wriston.JORDAN: Is he the ATM guy?ALEX: He’s the architect of modern banking. He didn't just want a bank; he wanted a global technology company that handled money. He pushed credit cards—which they called "The Everything Card"—and spent billions on computer systems while other banks were still using ledger books.JORDAN: So they were the Apple of banking? Disrupting everything?ALEX: Precisely. But there was a catch. Since the Great Depression, the Glass-Steagall Act had prevented banks from being both a regular commercial bank and a risky investment bank. Wriston and his successors hated that wall, and they spent decades looking for a sledgehammer to knock it down.[CHAPTER 2 - Core Story]ALEX: That sledgehammer arrived in 1998 in the form of a man named Sandy Weill. He was the CEO of Travelers Group, a massive insurance and investment firm, and he proposed a 70-billion-dollar merger with Citicorp.JORDAN: But wait, if Glass-Steagall was still law, wasn't a merger between a bank and an insurance giant illegal?ALEX: It was technically illegal at the time. But Weill and Citicorp CEO John Reed did it anyway. They announced the merger and basically dared Congress to stop them, banking on the idea that they were creating a "financial supermarket" that would benefit everyone.JORDAN: That’s incredibly bold. Did the government actually cave?ALEX: They did. A year later, Congress passed the Gramm-Leach-Bliley Act, which repealed the old restrictions and retroactively blessed the birth of Citigroup. Sandy Weill had his empire: you could get your checking account, your home insurance, and your stock portfolio all under one red umbrella.JORDAN: It sounds convenient, but also like a lot of eggs in one very large and complicated basket.ALEX: And that basket had holes. By 2008, Citigroup’s complexity became its curse. They had loaded up on billions of dollars in subprime mortgage-backed securities—assets that were essentially ticking time bombs. When the housing market crashed, the "financial supermarket" caught fire.JORDAN: How bad did it get? Were they actually going under?ALEX: They were on the brink of total evaporation. To prevent a global meltdown, the U.S. government staged a massive intervention. They injected 45 billion dollars in cash and guaranteed over 300 billion dollars’ worth of the bank's risky assets. At one point, the American taxpayer essentially owned 36 percent of Citigroup.JORDAN: So the bank that wanted to be more powerful than the law ended up being subsidized by the people who live under those laws.ALEX: Exactly. And the drama didn't end with the bailout. The next decade was a parade of fines. They paid 7 billion for toxic mortgages, hundreds of millions for manipulating interest rates, and almost a billion for colluding on currency markets. JORDAN: It sounds like the bank was just too big to control itself.ALEX: That’s the consensus. In 2020, they even had a world-class facepalm moment called the "Revlon Error." A Citibank employee accidentally wired 900 million dollars of the bank's own money to Revlon’s lenders. JORDAN: 900 million? By accident? I feel bad when I Venmo the wrong person twenty bucks!ALEX: It was a massive embarrassment that proved their internal systems were still a mess years after the crisis.[CHAPTER 3 - Why It Matters]JORDAN: So where does that leave them today? Is the "supermarket" still open for business?ALEX: Under their current CEO, Jane Fraser—the first woman to lead a major U.S. bank—the strategy has completely flipped. She’s essentially dismantling Sandy Weill’s dream. She is exiting consumer banking in dozens of international markets and focusing the bank on what it does best: helping massive corporations and the ultra-wealthy move money.JORDAN: So they're finally admitting that being everything to everyone was a mistake?ALEX: They’re trying to become "smaller and simpler," which are two words you never used to hear in the same sentence as Citigroup. They are the ultimate case study in the dangers of complexity. They proved that if a bank is too big to fail, it might also be too big to manage.JORDAN: It’s a long way from the bank that financed the War of 1812.ALEX: It is. They’ve spent two centuries trying to conquer the financial world, and now they’re spending billions just trying to make sure they don’t accidentally wire a billion dollars to the wrong person again.[OUTRO]JORDAN: Alex, what’s the one thing to remember about Citigroup?ALEX: Citigroup is the institution that broke the rules of American banking to become a global giant, only to prove that extreme size creates risks that no bailout can truly fix. JORDAN: That’s Wikipodia — every story, on demand. ALEX: Search your next topic at wikipodia.ai.