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) -- If the Volcker rule passes, it would wreak havoc for all the big banks, but it might prove particularly challenging for


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boss Vikram Pandit.

The Volcker rule would force giant banks to choose between high-risk businesses like private equity and proprietary trading, and boring, relatively safe businesses like retail banking.

If it passes,

Goldman Sachs

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Morgan Stanley

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would probably have to get out of the deposit-gathering business altogether, while

Wells Fargo

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Bank of America

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JPMorgan Chase

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and Citigroup would all have to give up the bulk of their trading and private equity operations.

The problem for Pandit is that, as a former Morgan Stanley executive who eventually started his own hedge fund, he comes from the trading and risk-taking side of the divide. That means if Citigroup sheds those aspects of its business, it would make sense for it to have a commercial banking executive like Manuel Medina-Mora, former head of Citigroup's Banamex unit who was recently promoted to run Citigroup's consumer banking business.

Many people think the Volcker rule is dead. Senate Banking Chairman Chris Dodd (D.,Conn.)

appears to have aligned himself against it

and several observers have argued JPMorgan's purchase of energy trading assets from the

Royal Bank of Scotland

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indicates the bank is betting against the proposal, though

I recently warned against reading too much into the deal's implications regarding the Volcker rule


Rochdale Securities analyst Richard Bove thinks the fact that Pandit has hung around this long, despite "constant attacks from the press," suggests his job is safe. He notes that Citigroup is shrinking and selling off risky businesses, such as Phibro, a commodities-trading hedge fund it unloaded in October. Those moves -- both the general shrinking and the dumping of risk-based businesses -- are in keeping with the spirit of Volcker's proposal, Bove notes.

Still, the only way for Citigroup to be sure of complying with the Volcker rule would be to dump its investment banking operations altogether. Otherwise, it is too difficult to distinguish between proprietary and client-based businesses. And if Citigroup does that, what is the point of having a former Morgan Stanley executive and hedge fund boss at the top of the organization?


Written by Dan Freed in New York