Smith Barney on the block as Rubin steps down at Citi

Former Treasury Secretary Robert Rubin has decided to step down from his role as a director at troubled banking giant Citigroup.

NEW YORK (CNNMoney.com) -- Citigroup's Robert Rubin said Friday he would step down following scrutiny about his role at the financial giant -- which has lost in excess of $20 billion over the past year.

The New York City-based bank said Rubin would retire from his role as senior counselor effective immediately and would not stand for re-election as director at the company's next annual meeting.

"This is not a decision that I have come to lightly," he said in a statement. "But as I enter my 70's and with all that is now in place at Citi, I believe the time has come for me to make these changes."

Separately, Citigroup (C, Fortune 500) is in talks with Morgan Stanley (MS, Fortune 500) about merging their brokerage operations, a source familiar with the negotiations told CNN.

Under the terms of the deal, Morgan Stanley would make a payment to Citigroup for an undisclosed sum for a 51-percent stake in Citigroup's Smith Barney asset management division. The deal would be structured as a joint venture, but Morgan Stanley would be able to increase its stake over the next three to five years before ultimately assuming total control.

The deal, which could be reached in the next couple of days, would create a massive network of brokers totaling about 20,000, according to the source.

A Citigroup spokeswoman declined to comment, calling it a rumor. Calls to Morgan Stanley requesting comment on the matter were not immediately returned.

Rubin, who joined Citigroup nearly a decade ago after serving as Treasury Secretary during the Clinton administration, had faced questions about his failure to stop the company from ramping up its risk exposure, most notably to the U.S. housing market.

Over the past four quarters, Citigroup has lost more than $20 billion and is widely expected to report yet another loss when the company reports its latest quarterly results at the end of this month.

In November, the bank teetered on the brink of collapse before the U.S. government announced a massive rescue package for the firm in which regulators agreed to backstop losses tied to more than $300 billion in troubled assets at Citigroup.

At the time, the Treasury Department agreed to inject $20 billion into the company. That was on top of the $25 billion invested in Citigroup a month earlier.

Citigroup shares, which have lost more than three-quarters of their value in the past year, slipped nearly 6% in Friday trading.

Citigroup CEO Vikram Pandit praised Rubin's "invaluable contributions" to the company, such as his role in building business relationships around the globe.

Rubin said he planned to focus his energies on other activities, including the Local Initiatives Support Corporation, a community development organization that he has long chaired.

CNN's Karina Frayter contributed to this report