"It’s
understandable why board members and CEOs want to grow the banks to gorge on
complex financial structures despite the risk they pose. They come from the old
world and still think profits grow with size. They know the biggest upfront
profits come from opaque financial structures that allow them to extract bigger
margins.
And for nine out of ten
years they are right and get paid well, but they are building banks destined to
fold under their own size and complexity. It’s the tenth year that is the cost
to the equity holders and the general public.
Chuck Prince was the
CEO of Citibank from 2003 to 2007. He roughly doubled the assets owned, from
$1.3 to $2.2 trillion. He was fired in late 2007 as the stock collapsed from 55
to 2. During that period he was paid roughly $130 million."
