The Problems With C

What do all of those people at Citigroup (C - commentary - Cramer's Take) do? As Vikram Pandit meets with investors today, it is worth pondering how a firm with 300,000 people keeps laying people off, yet it means nothing.

There are two problems with Citigroup. First, they invest terribly. They could have 50 employees and invest badly or 500,000 and invest badly.

Everyone talks about their troubled portfolio and their troubled hedge funds. No one talks about performance. It's as if what happened here was that they chose some asset class and the losses were then inevitable. They simply failed to invest well. Their hedge funds put on bad strategies. Their managers picked bad assets. We keep hearing about risk controls, the lack of risk controls. In the end, it's direction that matters, not risk controls. They played the market and bet wrong, using the wrong merchandise. Why doesn't anyone see that?

The second thing that is wrong is that if Pandit fired 100,000 people today, not 2,000 here and 3,000 there, I have a sense that it wouldn't matter. How many of these people produce revenue? How many of these people are even necessary? We never know. Pandit doesn't have to cut people, he has to sell divisions, if they are worth anything.

I find all of this unforgiveable. I don't care about Bob Rubin and what he had to do with it. He didn't do the hiring. Should he be fired? Wrong question. Everyone should be resigning, admitting they did badly. That's OK, too. People do resign when they do badly. It does happen, although it certainly doesn't happen at Citigroup.

The best thing I can say about Citigroup is that its shareholders are such believers that they are willing to take a huge beating. I figure Pandit will just issue another $10 billion in equity and eliminate the dividend. He ought to do that. It makes sense, and it will viewed positively as "the end of the nightmare." The end, that is, until he raises another $10 billion, which will be viewed as "opportunistic" and "smart."

I live in a real world. These things are bad, not good.

I guess I am an anomaly.

I reiterate that Citigroup should be sold.

Until someone comes in and breaks it up.

At the time of publication, Cramer had no positions in the stocks mentioned.

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