New York CNN Business  — 

Citigroup faced the darkest moment in its two-century history. It was rapidly losing money, its stock price was in free fall and it was cutting tens of thousands of jobs. The troubled bank turned to Dick Parsons to lead it out.

Parsons, already wealthy and successful, wouldn’t have been blamed had he turned down Citi (C)’s chairman job in 2009. Citi (C) was in shambles. And bankers were being blamed for the worst financial crisis since the Great Depression.

But Parsons, a Citi director since 1996, felt he had no choice but to help save the bank from its near-death experience.

“You can’t abandon your troops when the going gets tough,” Parsons told CNN’s Poppy Harlow in an exclusive interview for the Boss Files podcast.

At the time, Citi was a poster child for everything that was wrong with the American financial system. It got way too big, took excessive risks and eventually needed taxpayers to bail it out. Citi, which traces its history to 1812, would receive $476 billion in cash and guarantees from the federal government, according to a 2011 Congressional report.

When Parsons, the former CEO of Time Warner, stepped into the chairman role he had many challenges ahead. He had to oversee the repair of Citi’s broken balance sheet and restore the shattered confidence among shareholders. But first he needed to convince regulators not to take a wrecking ball to Citi.

“They really wanted to knock the bank over. I mean, it was incredible,” Parsons recalled. “I was like, ‘Do you guys know what you’re talking about here?”

In a follow-up interview, a spokesperson for Parsons added: “Some of the regulators, not all, wanted the bank to fail and to take it over.”

The FDIC, then led by Sheila Bair, took an especially tough stance towards Citi, he said.

“We went right down to the wire with her,” Parsons said, adding Citi was “maybe hours” away from losing that battle with the FDIC.

Parsons said he prevailed in part by warning Bair that certain steps the FDIC wanted to take would backfire.

“It would have resulted in a run on the bank,” Parsons said. “Not by individual depositors, but by the secondary market and funders. That’s where the bank gets its funding.”

In other words, there could be another implosion like the collapse of Lehman Brothers the September before. And like Lehman, that would have had global implications.

“If you sort of unplug Citi, you would’ve unplugged the whole damn thing,” Parsons said.

Dick Parsons, the former chairman of Citigroup, said he warned regulators against taking extreme steps against the troubled bank. "It would have resulted in a run on the bank," Parsons told CNN's Poppy Harlow.

Bair, who was recently named to the board of government-sponsored mortgage giant Fannie Mae, dismissed the idea that regulators wanted Citi to fail.

Sheila Bair: Citi ‘had a bad attitude’

“That’s ridiculous,” the former FDIC chief told CNN Business. “Why would we want Citigroup to fail? That’s revisionist history. Citigroup’s problems were of its own making.”

Bair acknowledged that she wanted Citi to make management changes and that some FDIC examiners wanted to put the bank on its troubled bank list.

“I personally bent over backwards to keep them off the public troubled bank list. I was concerned about how that would destabilize the system,” Bair said. “I was trying to help them and they were still fighting me. Citigroup just had a bad attitude.”

The FDIC declined to comment due to its policy against commenting on open and operating institutions.

The era of mega-mergers

Parsons joined Citi’s board 1996, during a period of rapid growth on Wall Street and an era that ushered in the creation of mega banks.

In 1998, Citi announced a merger with insurance giant Travelers, a deal that would make it a titan of finance. The marriage went forward after Congress and President Bill Clinton repealed the Glass-Steagall Act, the Depression-era law that prohibited traditional banks from doing the riskier work of investment banks, in 1999.

Wall Street firms, unshackled by Glass-Steagall, went on to make colossal bets on real estate that would blow up when home prices collapsed.

Parsons recalled he was on the board when Citi and other firms gobbled up “all the stuff that went poof in 2009.”

Between 2000 and 2007, Citi’s leverage nearly doubled to 32-to-1, according to a report by the Financial Crisis Inquiry Commission, which investigated the causes of the meltdown. Citi’s actual leverage was far greater because the bank kept certain assets off its balance sheet, the report said.

After the crisis, Parsons served as one of the public faces of Citi. He smoothed relations with regulators, soothed worried shareholders and restored confidence in the bank’s management. By the time he stepped down as chairman in April 2012, Citi had finally stabilized. It had returned to profitability and repaid its bailouts. The meltdown was over.

‘Everything fell off the cliff’

The Citi role wasn’t the first time Parsons was thrust into a crisis.

“I was in this movie before,” he told Harlow.

Parsons, a former lawyer, became CEO of Dime Bancorp in the 1990s just before the savings-and-loan crisis struck.

“Everything fell off the cliff,” Parsons said.

He and his colleagues only narrowly convinced regulators not to seize Dime, which would have been the biggest failure in FDIC history.

Parsons also led CNN owner Time Warner after the media giant’s infamous merger with AOL. He recalled that AOL was marred by the one-two punch of the dot-com crash and the rise of high-speed broadband internet connections.

“The ship was foundering,” Parsons said. “Once you hit the iceberg, you’ve got to get a new list of priorities….Plug the leak, get everybody with their life vests on.”

In 2003, Parsons would preside over a $98.7 billion annual loss at Time Warner, driven by an accounting charge caused by AOL’s shrinking value. At the time, it was the largest loss in American history. [It was later narrowly dwarfed by AIG’s $99.3 billion loss in 2008.]

Reflecting on his tenure running Time Warner, Parsons acknowledged he “never figured out…what to do with AOL.”

Time Warner eventually spun off AOL in 2009 and it was later acquired by Verizon (VZ). Time Warner has since been purchased by AT&T (T) and the media giant has been rebranded as WarnerMedia.

Battling cancer

Parsons is facing yet another battle today, this time with cancer. Last year, he stepped down as interim chairman of CBS (CBS) due to complications from multiple myeloma.

He acknowledged the fight with cancer has changed him.

“You become more aware of your own mortality,” Parsons said. “And that modifies and changes your priorities and your agenda in terms of the things that are important to get done now.”