Citigroup has selected one of the executives who handled the rescue of Long Term Capital Management to head a new unit to manage the bank’s subprime mortgage-linked assets.
Richard Stuckey, 51, was one of the six Wall Street executives put in to bring the giant hedge fund back from the brink of collapse in 1998. On Sunday, Citi announced the formation of a new unit that will focus solely on managing its assets “related to subprime mortgage securities and their resultant exposures”.
Citi revealed that it was facing losses of up to $11bn on the $55bn of subprime-related direct exposures at the end of the third quarter. The scale of the losses prompted Chuck Prince to step down as chairman and chief executive.
Announcing the new unit, Robert Rubin, who has taken over as chairman, said it would be separate from the rest of Citi’s capital markets and banking business.
Mr Stuckey was head of fixed-income derivatives at Citi’s Salomon Smith Barney unit when he was appointed its representative on the committee put in to run LTCM by the consortium of banks that bailed it out.
Mr Stuckey is currently head of finance, G10 risk treasury and relative value in Citi’s fixed-income, currencies and commodities operation. He will be assisted by Mark Tsesarsky, head of special situations securitisation in fixed income.
In a memo to staff, Jamie Forese, co-chief executive of markets and banking, said the new group would be responsible for managing Citi’s remaining asset-backed collateralised debt obligation warehouse holdings, unsold primary asset-backed CDO inventory and asset-backed super senior exposures. Other structured credit and subprime positions – including any future activity – will continue to be managed by the existing businesses.
Mr Forese also warned that Citi would “review our credit businesses to better align them with the future opportunity”.