Citigroup chief quits after big mortgage-linked losses

NEW YORK -- Charles Prince, the chairman and chief executive of Citigroup Inc., resigned Sunday amid billions of dollars in losses from bad investments in mortgage-related debt.

Citigroup, which took a hit of $6.5 billion in asset write-downs and other credit-related losses in the third quarter, said it will write down $8 billion to $11 billion more.

The nation's largest banking company announced Prince's widely expected departure after an emergency board meeting.

He was replaced as chairman by former Treasury Secretary Robert Rubin, a former co-chairman of Goldman, Sachs & Co., who has served as chairman of Citi's executive committee. Citi said Sir Win Bischoff, chairman of Citi Europe, would be interim CEO.

Prince was a casualty of a debt crisis that has cost billions at other financial institutions as well. Just last week, Stan O'Neal resigned as CEO of Merrill Lynch & Co.

Prince, 57, became chief executive of Citigroup in October 2003. Citigroup's stock lagged its peers' while Prince executed what was called an umbrella model of corporate organization, with several separate lines of business. But shares closed Friday at $37.73, about 20 percent below where they were when Prince became CEO.

Prince's position looked especially shaky after the company estimated Oct. 1 that third-quarter profit would decline about 60 percent to $2.2 billion after seeing nearly $6 billion in credit costs and write-downs of overly leveraged corporate debt and souring home mortgages. Prince said earnings would return to normal in the fourth quarter.

But two weeks later, Citigroup released its third-quarter results: The write-downs and credit costs exceeded $6 billion.

Citigroup wasn't alone in its third-quarter turmoil. When borrowers with poor credit stopped paying their mortgages, many banks not only had to take losses on those subprime mortgages, they also saw instruments in their portfolios backed by mortgages plummet in value.

Those instruments, collateralized debt obligations, or CDOs, raise money by selling bonds to investors and using the proceeds to buy other bonds, many of which are backed by subprime home loans.

Merrill and Citigroup were the biggest issuers of CDOs in the first half of the year; together they put together more than $61 billion in deals, or about 20 percent of all debt obligations, according to Asset-Backed Alert, a trade publication.