World financial news

Citigroup Inc. hired Willem Buiter, a former Bank of England official who has criticized the Federal Reserve for being too close to Wall Street, as its chief economist.

Buiter, 60, will join the bank in January and fill the position left vacant by Lewis Alexander’s move to the U.S. Treasury eight months ago, New York-based Citigroup said in a statement today.

The appointment by the bank, which is 34 percent owned by the U.S. government, puts an academic known for his outspokenness in its most senior economics position. In 2008, Buiter told the Fed’s annual symposium in Jackson Hole, Wyoming, that it pays an “unhealthy and dangerous” amount of attention to the concerns of the biggest U.S. financial institutions.

“As one of the world’s most distinguished macroeconomists, Willem’s deep knowledge of global markets and economies, and emerging markets economies in particular, will be invaluable to our clients,” Hamid Biglari, Vice Chairman of CitiCorp, said in the statement.

Buiter, currently a professor of political economy at the London School of Economics, has been unafraid to speak his mind about former or potential future employers.

CDO Comments

“In August 2007, several CEOs of major cross-border banks admitted they didn’t know what a CDO was,” Buiter said at the European Banking Congress on Nov. 20 in a discussion on the role of collateralized debt obligations in the financial crisis. “Most members of the Bank of England’s Monetary Policy Committee didn’t either.”

Buiter called Citigroup “a conglomeration of worst- practice from the across the financial spectrum,” in an April posting on his blog, posted on the Web site of the Financial Times.

In June, he wrote in the blog that the appointment of former Citigroup Chairman Winfried “Win” Bischoff to help oversee a report on the future of U.K. international financial services was “the most ridiculous appointment since Caligula appointed his favorite horse a consul.”

Citigroup spokeswoman Danielle Romero-Apsilos declined to comment. A message left for Bischoff at Lloyds Banking Group Plc, where he is now chairman, wasn’t returned. Felix Salmon of Reuters reported Buiter’s comments on Citigroup and on Bischoff earlier today.

Founding Member

Buiter was one of the founding members of the U.K. central bank’s rate-setting panel when he joined in June 1997. In March 1999, he voted for a 0.4-point interest-rate cut, the only attempt in the MPC’s history for a move that wasn’t in a quarter-point multiple.

In 2008, Buiter turned his fire on his hosts when the Fed invited him to its annual retreat in the Teton Mountains.

“The Fed listens to Wall Street and believes what it hears,” Buiter told an audience of central bank officials from the Fed and around the world. “This distortion into a partial and often highly distorted perception of reality is unhealthy and dangerous.”

Fed Governor Frederic Mishkin said at the same event that Buiter’s paper fired “a lot of unguided missiles,” and former Vice Chairman Alan Blinder “respectfully disagreed” with his analysis of the central bank’s crisis management.

Dubai Views

Buiter has been a consultant to Goldman Sachs Group Inc. since 2005, according to today’s statement. He has a bachelor’s degree from Cambridge University and a doctorate from Yale University.

Questioned on Bloomberg Television today about government- controlled Dubai World’s request for a standstill agreement with creditors, Buiter said that they shouldn’t expect a full state- backed rescue.

“This is a business that’s fallen on hard times and its creditors and bondholders simply have to take their lumps and not expect a sovereign bailout,” he said.

Buiter was chief economist for the European Bank for Reconstruction and Development from 2000 to 2005. He has been an adviser to the International Monetary Fund, the World Bank and the Inter-American Development Bank, according to the statement.

Alexander, who had worked at Citigroup since 1999, left in March to become a counselor on domestic finance issues to Treasury Secretary Timothy Geithner. He was paid $2.4 million by Citigroup in 2008 and the first months of 2009, according to his financial-disclosure form filed with the Treasury. In December 2007, he predicted the U.S. would probably avoid a recession.

Buiter is married to Anne Sibert, an economics academic who was appointed as a member of Central Bank of Iceland’s five- member Monetary Policy Committee earlier this year, according to a Web log posting on his site.

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