Citigroup History

History of Citigroup / Travelers Group

Commercial Credit

The history of the corporation now known as Citigroup is primarily the history of its Chairman, Sandy Weill, who spun off a Consumer Finance company known as Commercial Credit from Control Data Systems, and used it to begin assembling a gigantic financial conglamerate. Consumer Finance is essentially the business of lending to people with poor credit histories at high interest rates. Some critics have called this "predatory lending" or "loan sharking". After aquiring some small consumer finance companies, Commercial Credit aquired the much larger Primerica, and adopted the more well known Primerica name for the holding company.

Primerica

Primerica was a conglomerate patterned after General Electric by the famous mutual fund manager Gerry Tsai. Like GE was doing at the time, Tsai was trying to position Primerica heavily into the financial services realm, aquiring A L Williams, a controversial MLM insurance agency company, and Smith Barney, a large stock broker. He bought Smith Barney at the height of a bull market, and the resulting stock market crash put a tremendous strain on the overall company, forcing him to sell. Tsai had inserted lucrative golden parachutes into his contract agreements because he knew he was going to have to sell, which made the deal more expensive than what Commercial Credit was willing to pay. Weill was then convinced to buy the company because he would get to use the company's Gulfstream G-4 jet.

Upon aquiring the company in 1988, Weill spun off the non-financial businesses of the conglomerate, and attempted to institute the practice of "cross-selling" (also called "cross-servicing"), which he had envisioned previously at American Express. Instead of the corporation owning a stock brokerage, insurance agency, and consumer finance company and letting them each run essentially seperately, Weill was interested in each selling each others' products. For example, the insurance agents could sell Smith Barney mutual funds.

During this period Weill became interested in the Travlers Insurance company, which had come to Weill for a cash injection because of losses sustained during Hurricaine Andrew. Weill also inserted management into that company to oversee operations and cost cutting. This eventually led to the aquisition of Travelers Insurance.

Travelers Group

The Travelers Insurance aquistion added property and casuality, and life and annuities underwriting capabilities to the group. It also brought along the Travelers red umbrella logo, which Weill applied to all the businesses within the group. During this time Travelers aquired Shearson, which was a large stock brokerage Weill used to run. It then aquired Salomon Brothers, a famous Investment Bank. Weill attempted to negotiate a deal to merge with JP Morgan, but this was rejected because the JP Morgan CEO would have wanted to become CEO of the combined company. Weill was eventually sucsessfull at convincing John Reed, the CEO of Citicorp, to merge.

Citicorp

Citicorp was the descendant of City National Bank, founded in New York. It was one of the oldest Banks in the United States, and had the largest international branch presence of any United States headquartered bank. It specialized in large corporate banking, and was one of the largest banks in the United States at the time. The CEO at the time of the merger, John Reed, was instrumental in pushing for the acceptance and use of ATM machines, and had seen the company through a financially bleak period when it had many problems with international loans defaulting. Reed had been trying to change the corporate culture of Citicorp, for example by hiring top executives from consumer product companies, not banks. Reed felt that the chance to merge with the Travelers Group would help effect change in this area.

Overview Citigroup / Travelers Group

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