History of Citibank

Running head: HISTORY OF CITIBANK
History of Citibank
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Abstract
Citibank has been very successful in the banking industry and especially in the United States. The bank has achieved high growth to become one of the largest banks in the world. Its growth can be attributed to its high quality services and offering of a variety of banking products as well as non-banking products and services. This paper will look at the history of Citibank as well as the ethical standards that it has embraced to achiever the high growth. It will also address. it will also address the bank’s relation to the capital markets.
Citibank
Citibank is one of the major International banks and a branch of Citigroup. It was founded in 1812. It was initially referred to as the City Bank of New York. Citigroup was named the largest bank in the United States by assets where Bank of America and JPMorgan Chase held the first and the second positions respectively. The bank haws retail bank branches in over 160 countries around the world. It has 1400 offices and more than half of them are found in the United States. The latest branches of the bank have been opened in Philadelphia, Boston, Dallas and Houston. Other than offering the normal banking transactions, Citibank also offers credit cards, insurance, and other investment products (Stone & Brewster, 2004).
The bank has an online banking which is currently the most successful in all the fields boasting around 15 million customers. The bank was hard hit by the recent financial crisis that occurred between 2008 and 2009 leading to heavy losses especially on the mortgage assets. It was bailed out by the government in agreement that was not disclosed. It was initially given $25 billion and later in 2008, $25 billion was added to prevent it from collapsing. This investment in conjunction to guarantees of risky assets totaled to $306 billion amount which the Citibank has paid in full (Stone & Brewster, 2004).
Col. Samuel Osgood was the first president of the bank who was also the statesman. Later, the management of the institution was taken over by a world’s known businessman Moses Taylor in the 19th Century. The bank joined the new national banking system of the united state in 1863 where it changed its name to the National City Bank of New York. In 1868, the bank was named as one of the largest bank in the U.S. in 1897, the bank made a record of the first U.S bank to open a foreign department (Stone & Brewster, 2004). This added the bank’s popularity and led to increase in customers as a result of the prestige.
In 1914, the National City Bank sought for permit from the Federal Reserve Act to open a foreign banking office where it was granted. The permit made it to become the first bank in the United States to have an overseas branch. This branch was opened in Buenos Aires, Argentina. Many of the banks international offices were opened between 1901 and 1902 by international Banking Corporation (IBC). IBC was a chattered company that dealt with banking issues outside the U.S, but the activity was prohibited in the U.S. IBC became a wholly owned subsidiary and merged with the National City Bank and by 1919 the bank had grown to become the first bank in the united states to have assets worth 1 billion (Ameresekere, 2011).
In 1910, the National City Bank purchased a substantial share of Haiti’s National Bank. This bank acted as Haiti’s treasury and had a monopoly on note issue. After the bank invaded Haiti, it bought all the Haiti’s National Bank capital stock. This activity led the bank to facing criticism. The critics argued that such an act was against bank practices and some argued that such actions were monopolistic and unfair practices. The bank initially did not pay interest to the government of Haiti on surplus amount of money that the bank deposited in the treasury which was used to extend bank loan to investors by Citibank in New York. The bank started paying interest in 1922 but at the rate of 2%. Economists estimated that the loss they would incur amounted to $1 billion where as the revenues for Haiti’s government were less than $7 billion (Ameresekere, 2011).
In 1921, Charles E. Mitchell was elected as president and was made the chairman in 1929. His administration saw the bank expand rapidly since the bank had 100 overseas branches in 23 countries by 1930. The bank’s policies under Mitchell’s administration have been criticized by economists to have the stock market crash of 1929 which led to the great depression. A senate committee was formed in 1933 to investigate heavy losses, excessive pay and tax avoidance. The committee, which was known as Pecora Commission, held that Mitchell was more responsible than any other person for the stock market crash (Ameresekere, 2011).
The banks headquarters that were located at Buenos Aires, Argentina were blown up by Severino Di Giovanni at the helm of international campaign in the support of Vanzetti and Sacco in 1927. James Stillman Rockefeller became the president of the bank in 1952 and later became the chairman 1959 until 1967. Stillman was a direct descendant of Rockefeller. His cousin, David Rockefeller, was elected the president of Chase Manhattan Bank which was National City Strongest competitor in terms of dominance in the United States’ banking industry. The National City Bank was later transformed to Citibank N.A in 1976 which symbolized national association (Hitt, Ireland & Hoskisson, 2007).
After the change of name, the bank started leasing credit cards and introduced certificates of deposits in London that were issued in US Dollars. This was the first negotiable instrument since 1888. Later, the instrument would become part of the famous MasterCard. In 1976 still, the bank was renamed Citicorp under the CEO Walter B. Wriston. By this time, the bank had created its own bank holding company and had developed to become a wholly owned subsidiary of that holding company. After the name changed to Citicorp, all its initial shareholders were converted to become the shareholders of the new Company (Hitt, Ireland & Hoskisson, 2007).
The change of name also helped to bring clarity to customers in Ohio with National City Bank in Cleveland. However, the two banks did not any common areas except for credit card areas which were issued at Citicorp’s territory. any remaining confusion would be later be erased when National City Bank of Ohio was acquired by PNC Financial Services in 2008 as a result of mortgage crisis. Shortly after the change of name, Citibank launched an automated banking card that it named Citicard. This innovation allowed customers to conduct all their transactions without a passbook. The bank’s branches also had terminals that allowed the customers to access account information without visiting a bank teller (Hitt, Ireland & Hoskisson, 2007). Customers could also use their Citicard when the ATMs were introduced later.
The bank launched the credit card business in 1960s. The National City Bank purchased Carte Blanche from Hilton hotels but was later to sell the division under immense pressure from the government. The company created its own credit card in 1968 and called it “The Everything Card” which was promoted as the version of BankAmericard from the East Coast. The card became too expensive to promote, which made it to join Master Charge in 1969. Between 1977 and 1987, the bank tried to create an independent credit card they named as Choice Card but was still unsuccessful. Launching an independent credit card proved much of a...