Citi: ‘Overhaul? What overhaul?’

Citgroup CEO Vikram Pandit may be thumbing his nose at Washington.

The government-owned bank that he runs plans on raising more than $3 billion for hedge-fund and private-equity funds, despite a looming regulatory overhaul bill in Washington that would mean the death of such operations being housed in major money center institutions.

A unit within Citi, known as Citi Capital Advisors, which manages some $14 billion in assets, is raising $1.5 billion for private-equity investments and about $1.75 billion for hedge funds, according to a Bloomberg report.

The capital-raising efforts come even as Washington is in the process of putting the finishing touches on a sweeping financial regulatory overhaul that includes a measure, known as the Volcker Rule, that would ban deposit-taking institutions from engaging in hedge-fund or private-equity investments.

Observers point out that Citi and other institutions are betting that rules being crafted now may take five or six years to become final. A Citi spokesman confirmed the capital raising plans but said the efforts are strictly client driven.