Citigroup Inc. CEO Vikram Pandit pledged last fall that he wouldn’t sell Smith Barney, the company’s brokerage operations; however, after billions of dollars in losses, Citigroup is now negotiating a $10 billion deal that would release control of its brokerage arm to Morgan Stanley, sources close to the deal said in a Bloomberg article.

On Nov. 21, Pandit told employees in a conference call that he didn’t plan to break up the company, specifically noting he wanted to keep Smith Barney. Yet soon after, he acknowledged that relinquishing control of the brokerage operations could result in better management of Citigroup’s remaining businesses.

“You’re selling out the future to get through the crisis of the present, and unfortunately they don’t have a lot of other choice,” said David Trone, an analyst at Fox-Pitt Kelton Cochran Caronia Waller in New York.

The $5 billion to $6 billion after-tax gain for Citigroup would be in addition to the $45 billion the company received in federal bailout funds, and a deal is expected to be reached as soon as this week.

Once bought, the new firm, which has been tentatively named Morgan Stanley Smith Barney, would employ approximately 22,000 brokers, exceeding the 20,000 brokers that resulted from Bank of America Corp.’s takeover of Merrill Lynch & Co. Inc.

Citigroup posted $10.4 billion of net losses in the first nine months of 2008, which puts the company on the worst track since its inception in 1812. Analysts believe the company could report a loss of as much as $5.82 billion for the fourth quarter.