Citigroup (NYSE: C) CEO Vikram Pandit Blames Unregulated “Shadow Banking” for Industry Problems

Speaking at its bank credit card processing center in Las Vegas, Citigroup (NYSE: C) CEO Vikram Pandit blamed unregulated “shadow banking” as a major part of the banking industry’s problems, saying that he believes free markets are good for allocating resources, but “good regulation makes for better markets.”

Pandit was in Las Vegas to talk with the 1,700 workers at the credit card processing center, reiterating his and Citigroup’s commitment to the area. Some of this was because of the announcement that 75 workers at the facility would be laid off, generating concern over the future of Citigroup’s presence in the area.

“We plan to be here,” CEO Vikram Pandit said. “I believe we’ll be very confident with the presence we have here.”

Attempting to put a positive spin on things, a spokeswoman for the company said that while 75 workers from the credit card division will lose there jobs by the end of the year, the company has hired another 250 workers for its mortgage business in support positions, including mortgage underwriting, closing and processing.
 
Responding to questions on whether Citigroup had plans to expand in Nevada, Pandit said that while anything that makes sense he’s open to, the overall strategy of the company would be to focus on its existing operating branches and grow its interactions with its customers via the Internet.

Responding to the “moral hazard” related to banks being “too large to fail,” Pandit said that breaking them up isn’t the solution to the problem. Unfortunately, Pandit didn’t offer any suggestions to what the solution would be if breaking them up wasn’t it. It seems he doesn’t think being too large to fail is a problem, and it’s obvious why, as the discriminatory bailouts eliminated some major competitors while allowing the remaining banks to grow at their expense. I say discriminatory because of the government picking and choosing who they were going to help.

Concerning the extraordinary and growing federal deficit, he said that there is a lot of work to do to bring it down, and that while Pandit believes inflation will be inevitable, in his opinion it’ll take some time before it kicks in.

Others like commodities investor Jim Rogers believe we’re already experiencing inflation at the rate of up to 7 percent.

As far as the line that “shadow banking” has been a big part of the banking failures, that seems to be the line taken up by members of the American Banking Association, which also brought that up at their recent annual meeting in Chicago.