Citigroup takes a step ahead of reform --- and rivals

Commentary: Fundraising anticipates regulatory changes

By MarketWatch
NEW YORK (MarketWatch) -- A major Wall Street bank is making a move to get ahead of financial reform. Goldman Sachs Group Inc.? Nope. J.P. Morgan Chase & Co.? Try again.

Citigroup Inc. /quotes/comstock/13*!c/quotes/nls/c (C 4.01, +0.05, +1.26%) is seeking to raise $3.5 billion to fund its private equity and hedge funds, according to a report on Dow Jones Newswires and first reported by Bloomberg. Read Dow Jones report on Citigroup.

Citi Capital Advisers may seek $1.5 billion for private equity this year and $750 million for hedge funds. Another $1 billion could be raised next year, according to Bloomberg, citing anonymous sources. Read Bloomberg report.

The move isn't surprising given the groundswell of support for the Volcker Rule in Congress. The rule requires banks to wall off, curtail or spin off their proprietary trading, hedge and private equity operations.

At the minimum, banks will have to bolster capital to fund these operations as lawmakers seek to wall off customer deposits from risk-taking operations. The move is shrewd. There's never certainty about whether funding sources will come forward. Being first assures Citi at least a head start. But Citigroup isn't the financial institution most people associate with being ahead of the trends on Wall Street. Yes, Citigroup.

Remember it was Charles Prince, the former chief executive, who said "as long as the music is playing, you've got to get up and dance" referring to Citi following rivals funding private equity deals -- just before that market went belly-up. "We're still dancing," he added.

The soundtrack to financial reform is playing its opening overture. Citi is first on the dance floor, and this time, they're going to lead.

-- David Weidner