Charles Prince is the latest Wall Street executive to lose his job over huge losses stemming from subprime mortgage deals gone bad.
Prince stepped down over the weekend as chairman and chief executive of Citigroup, the nation's largest bank.
He will be replaced as chairman by Robert Rubin, 69, the former head of the U.S. Treasury. He had been chair of Citibank's executive committee.
Sir Win Bischoff, chairman of Citi Europe and a member of the Citi management and operating committees, will serve as interim CEO.
Prince stepped down after an emergency board meeting Sunday, becoming the second corporate head to succumb to over exposure of subprime loans and woes in the credit market overall.
Last week, Stanley O'Neal retired from the helm of Merrill Lynch.
Both Citibank and Merrill Lynch logged losses topping $8 billion, significantly higher than the amount their CEOs estimated.
Prince said in a statement that given the size of losses – between $8 billion and $10 billion — retiring was the only honorable thing to do.
In the third quarter, the bank had already taken a hit of $6.5 billion in asset markdowns and other credit-related losses.
Citigroup said despite the additional write-down it will retain its dividend and return capital ratios to adequate levels by the second quarter of 2008. CIBC Wolds Markets Corp. analyst Meredith Whitney said that is not likely.
Whitney said in a research note the anticipated fourth-quarter losses, coupled with $2.7 billion paid out in dividends, will strain capital levels even further.
Prince's five years as chief executive were never easy. He succeeded the powerful Sanford Weill, whose shoes were hard to fill, according to Roy Smith, a professor at New York University.
"He came in at a time when you know a famous leader had been yanked away and there were a lot of problems in the past. All sorts of market disruptions occurred. And he wasn't a charismatic leader who could rally the troops necessarily," said Smith.
Critics charge that Prince lacked the management skills to preside over such a big and unwieldy bank — 300,000 employees and operations in more than 100 countries.
But it was the subprime crisis that sealed his fate.
Smith said Citigroup took out big positions in risky securities.
"They've been very aggressive and they've been pushing profit growth very hard in a lot of areas. And that means that you pile up risks that don't necessarily bother you – unless, all of a sudden, markets change," he said.
Prince, 57, was insisting jut a few months ago that Citigroup's subprime exposure was not serious.
"One of the things that really shocked people this year is the appearance of him not being fully aware of the extent to which Citi was facing losses, and perspective losses, in the various high-risk credit markets," said Bert Ely, a banking consultant.
During a conference call with stock analysts last month, Prince acknowledged that Citigroup had suffered $6.5 billion in subprime losses. And in a tense exchange, Deutsche Bank analyst Mike Mayo intimated that given the losses maybe it was time for Prince to leave.
"Chuck said this was the year of no excuses. So what are the repercussions at the level of the office chairman?" Mayo said.
Prince replied that subprime losses aside, the company was doing pretty well: "No one can be happy with the results in our fixed-income business or with the results that relate to that. But, I think if you are able to look at other parts of the business, if you look at the strategic plan we're executing on, I think any fair-minded person would say that strategic plan is working."
But many investors worried that the losses were even bigger than they appeared. And those fears have been borne out in the $8 billion to $10 billion in pretax losses.
From NPR reports and The Associated Press
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