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 FINANCIAL CRISIS INQUIRY COMMISSION REPORT

backed securities in their collateral in  and  billion in . Among CDO un-
derwriters, including all types of CDOs, Citigroup rose from fourteenth place in
 to second place in , according to FCIC analysis of Moody’s data. 
What was good for Citigroup’s investment bank was also lucrative for its invest-
ment bankers. Thomas Maheras, the co-CEO of the investment bank who said he
spent less than  of his time thinking about CDOs, was a highly paid Citigroup ex-
ecutive, earning more than  million in salary and bonus compensation in .
Co-head of Global Fixed Income Randolph Barker made about  million in that

same year. Citigroup’s chief risk officer made . million. Others were also well re-
warded. The co-heads of the global CDO business, Nestor Dominguez and Janice
Warne, each made about  million in total compensation in . 
Citi did have “clawback” provisions: under narrowly specified circumstances,
compensation would have to be returned to the firm. But despite Citigroup’s eventual
large losses, no compensation was ever clawed back under this policy. The Corporate
Library, which rates firms’ corporate governance, gave Citigroup a C. In early ,
the Corporate Library would downgrade Citigroup to a D, “reflecting a high degree
of governance risk.” Among the issues cited: executive compensation practices that
were poorly aligned with shareholder interests. 
Where were Citigroup’s regulators while the company piled up tens of billions of
dollars of risk in the CDO business? Citigroup had a complex corporate structure
and, as a result, faced an array of supervisors. The Federal Reserve supervised the
holding company but, as the Gramm-Leach-Bliley legislation directed, relied on oth-
ers to monitor the most important subsidiaries: the Office of the Comptroller of the
Currency (OCC) supervised the largest bank subsidiary, Citibank, and the SEC su-
pervised the securities firm, Citigroup Global Markets. Moreover, Citigroup did not
really align its various businesses with the legal entities. An individual working on
the CDO desk on an intricate transaction could interact with various components of
the firm in complicated ways.
The SEC regularly examined the securities arm on a three-year examination cycle,
although it would also sometimes conduct other examinations to target specific con-
cerns. Unlike the Fed and OCC, which had risk management and safety and sound-
ness rules, the SEC used these exams to look for general weaknesses in risk
management. Unlike safety and soundness regulators, who concentrated on prevent-
ing firms from failing, the SEC always kept its focus on protecting investors. Its most
recent review of Citigroup’s securities arm preceding the crisis was in , and the
examiners completed their report in June . In that exam, they told the FCIC,
they saw nothing “earth shattering,” but they did note key weaknesses in risk man-
agement practices that would prove relevant—weaknesses in internal pricing and
valuation controls, for example, and a willingness to allow traders to exceed their risk
limits. 
Unlike the SEC, the Fed and OCC did maintain a continuous on-site presence.
During the years that CDOs boomed, the OCC team regularly criticized the com-
pany for its weaknesses in risk management, including specific problems in the CDO