Sallie Krawcheck, the head of wealth
management at Citigroup and often described as one of the most
powerful women on Wall Street, has fallen victim to the new regime
of Citi chief executive Vikram Pandit. She will leave at the
year-end.

Her departure follows a string of disagreements with the Pandit
regime, which is filling most top spots within the banking giant
with his close associates. Krawcheck is understood to have been
arguing for continued autonomy for Citi wealth operations,
including retaining an open-architecture approach to client
investments.

The wealth unit, which has some $1.8 trillion of client assets
under management globally, will now come under the control of
Citi’s investment banking division as it attempts to more closely
integrate various parts of the bank as well as cut costs.

Significantly, Citi’s Smith Barney wealth arm is undertaking a
number of structural changes now that Krawcheck is exiting. The
unit is consolidating its divisions and regions in order to
eliminate layers of management and help Smith Barney better serve
its clients.

Citi is also continuing to move Smith Barney brokers who have
wealthy clients to Citi Private Bank offices in an effort to
streamline its offerings. The pilot office, catering to clients
with at least $25 million in net worth, was launched in July.

Krawcheck will be replaced by Michael Corbat, an executive in the
investment bank who will report to John Havens, a longtime
associate of Pandit who worked with him at their former firm,
Morgan Stanley and their hedge fund, Old Lane. Citi has put other
former Morgan Stanley executives, including Brian Leach as the new
Citi chief risk officer, and Don Callahan, chief administrative
officer, in prominent roles.

Krawcheck reportedly rejected an offer by Pandit to give up
day-to-day running of the wealth division, which would have
involved taking the role of chairwoman in charge of relationships
with the bank’s top high net worth clients, according to Wall
Street reports.

She is regarded as performing creditably in the wealth arena at a
time when the parent company has run up huge losses on subprime
mortgage obligations. Her global wealth division generated $13
billion last year and this year it is proving relatively stable,
and even growing in Asia.

Krawcheck’s growing differences with Pandit over strategy included
money which she believed Citi owed to clients who had invested in
hedge funds and auction rate securities that turned toxic. She is
said to have argued that Citi had responsibility to pay clients
back for soured investments distributed by her brokers and
bankers.

Under a recently-announced settlement, Citi is returning $7.5
billion to clients which had invested in auction rate
securities.

Other tensions between her and Citi came over preserving her
division’s freedom to buy in products from other providers against
an internal move to sell more internally-generated products from
the investment banking and alternative investments divisions.

In a recent interview with the Financial Times, Krawcheck defended
Citi against charges by rivals that it only promoted internal
products rather than selling what was best for the individual
customer.

“That’s just obnoxious,” she declared. “I wholly reject the concept
that a large institution can’t have a personal role. I defy you to
say that.”

While Krawcheck doesn’t have another job waiting for her, at 43 she
is young enough to yet make her mark with another prominent
position on Wall Street, notwithstanding the current turmoil,
associates say.