Last Friday Bob Rubin stepped down as senior counselor at Citigroup. In a letter to CEO Vikram Pandit, Rubin announced his retirement and his decision not to seek re-election to the board. He praised Pandit. He noted that “Citi continues to have a very special franchise, with many strong assets and many terrific people.” He conceded that “There is still a great deal to do, but I have a great deal of confidence that Citi will me the long-term challenges ahead.” Pandit returned the favor. In an formal statement he lauded Rubin’s “invaluable contributions,” while Citi chairman Sir Win Bischoff threw in the obligatory “deeply grateful” and “miss him greatly” grace notes.

Then followed a torrent of speculation: A sale of 51 percent of Smith Barney to Morgan Stanley; the running out of the hour-glass for Pandit; a Dick Parsons for Sir Bischoff substitution; all as Citi limps to what analysts predict will be a $10-billion loss.  Citi confirmed on January 13 that “the company is in discussions with Morgan Stanley concerning a possible combination” of Smith Barney’s retail brokerage business and Morgan Stanley’s wealth management unit. “No definitive agreement has been reached, and no assurance can be given that any such agreement will be reached,” according to the Citi statement.

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