10. Should Morgan Rescue Citi?

One institution Morgan monitored closely in 1989 was Citibank for a special reason. Two years after Citi wrote off most of its Less Developed Country loans, it was embroiled in yet another crisis due to problems with commercial real estate and leveraged buyout transactions. By mid-1990, some observers viewed Citi as “technically insolvent.” One story that circulated for years was that Preston and Weatherstone could have acquired Citi for $10/share, but they passed. The popular rendition, however, is not accurate. The correct story is that Gerald Corrigan of the New York Fed approached them to take a 10% stake in Citi along with a mandate from the Fed to “fix” Citi’s capital shortfall. They passed because they were not interested in retail banking and viewed Citi as a distraction.