Citigroup Board Said to Weigh Options as Stock Drops

[文静]

Nov. 21 (Bloomberg) -- Citigroup Inc.’s board meets today to discuss the bank’s options after Chief Executive Officer Vikram Pandit’s efforts to rebuild investor confidence failed to halt the stock’s descent to a 15-year low, a person with knowledge of the matter said.

The board, led by Chairman Win Bischoff and independent director Richard Parsons, will meet at Citigroup’s headquarters in New York, said the person, who declined to be identified because the deliberations are private. The panel may choose to sell pieces of the bank or the entire company, the Wall Street Journal reported, citing unidentified people familiar with the situation. The New York Times reported that management isn’t actively considering a sale or split-up of the bank.

Citigroup, once the biggest U.S. bank, with a stock market value of $274 billion at the end of 2006, dropped yesterday to about $26 billion, slipping to No. 5 after Minneapolis-based U.S. Bancorp. A plan Pandit announced this week to cut costs by shedding 52,000 jobs and an endorsement by billionaire Saudi investor Prince Alwaleed bin Talal didn’t assuage shareholders’ concern that bad loans and securities writedowns may extend a yearlong run of net losses totaling $20 billion.

Pandit told employees this morning he has no plans to sell or spin off its Smith Barney brokerage, CNBC reported.

‘Dead Bodies’

“Investors right now aren’t convinced that we’re done seeing dead bodies on the Citigroup balance sheet,” said William Fitzpatrick, an equity analyst at Optique Capital Management Inc. in Milwaukee, which oversees about $1 billion and doesn’t own Citigroup shares. “That’s what the sell-off is, concern over more and more losses over the next couple of quarters.”

Citigroup spokeswoman Christina Pretto declined to comment on the board meeting. She reiterated a statement made by the New York-based company earlier this week that it has “a very strong capital and liquidity position and a unique global franchise.”

Including a $25 billion capital injection from the U.S. Treasury under the $700 billion Troubled Asset Relief Program, the company has at least $50 billion of capital in excess of the amount required by regulators to qualify as “well capitalized.” Capital is the cushion banks must keep to absorb losses and protect depositors.

‘Throwing in the Towel’

“Why would you want to sell if you know you can live through the crisis?” said Brad Hintz, an analyst at Sanford C. Bernstein & Co. in New York. “If I were Vikram, I’d probably turn to the board and say, ‘Let’s wait until January and see if the pressure comes off.’”

The company’s shares, which fell 26 percent in New York trading yesterday to close below $5 for the first time since 1994, rose to $5.08 before the official open of trading in New York today.

“What you’re seeing here is more emotional selling, more people throwing in the towel and they are throwing everything out, not just Citi,” said Matt McCormick, a portfolio manager and banking analyst at Bahl & Gaynor Investment Counsel in Cincinnati, which manages about $2.9 billion and doesn’t own Citigroup stock or debt.

Pandit, 51, has pledged to preserve Citigroup’s strategy of combining a wide range of financial businesses in a single company. They include branch banking, retail brokerage, trading, investment banking, credit cards and transaction processing.

Deposits Are Safe

Pandit was appointed last December to succeed Charles O. “Chuck” Prince, who was ousted as mortgage-bond writedowns saddled the bank with a record fourth-quarter loss of almost $10 billion. Prince was the handpicked successor of former Chairman and CEO Sanford “Sandy” Weill, who built the company through a series of acquisitions over 17 years before stepping down in 2003.

Bischoff, 67, was Citigroup’s top executive in Europe until he was named chairman when Pandit became CEO.

Bank employees have been telling customers their deposits are safe, and so far corporate clients haven’t moved their money elsewhere, said three people familiar with the matter who declined to be identified because they weren’t authorized to speak publicly about the accounts.

Chief Financial Officer Gary Crittenden, 50, has told colleagues it would be unwise to make hasty decisions to dispose of good businesses to satisfy investor demands for a show of action, one person familiar with the matter said.

‘Non-Core’ Units

The bank may try to sell “non-core” units, similar to the divestiture earlier this year of retail-banking operations in Germany and Citi Global Services Ltd., an Indian unit that processes transactions and provides other “back-office” services, Optique’s Fitzpatrick said.

“They’re still going to stick with the game plan of selling off non-core assets, but I don’t know what you can sell in an environment like this,” he said.

Morgan Stanley isn’t in talks about a merger with Citigroup, according to a person at the New York-based investment bank who declined to be identified because the company doesn’t comment publicly on potential deals. Morgan Stanley, which was the second biggest U.S. securities firm before converting to the fifth-biggest U.S. bank by assets in September, has said it plans to build its retail banking business and its brokerage division, which competes with Citigroup’s Smith Barney.

Citigroup executives who spoke on condition of anonymity because they weren’t authorized to comment publicly said they felt besieged by negative rumors propagated by short sellers betting on a decline in the share price.

Talks With SEC

Bank officials have discussed with the U.S. Securities and Exchange Commission and lawmakers the prospect of reviving a prohibition on short-selling financial stocks, according to a person familiar with the matter.

Few investors are willing to bet on the stock’s recovery, said Laszlo Birinyi, president of Birinyi Associates Inc. in Westport, Connecticut.

“The problem is credibility,” Birinyi said in a Bloomberg Television interview yesterday. “There seems to be no bottom.”

Costs for bad loans have almost doubled in the past year to $9.07 billion in the third quarter, and Pandit told employees this week that net credit losses in the banks’ consumer divisions may be as much as $2 billion per quarter next year. The cost cuts announced this week may save about $2 billion per quarter.

Government Intervention?

Citigroup is so integral to the global financial infrastructure that the U.S. government is unlikely to let the bank collapse, said Barry James, president of James Investment Research Inc., which manages $1.75 billion in Xenia, Ohio. He doesn’t own Citigroup shares.

While the bank’s debt holders may be spared, shareholders likely won’t fare as well, Bahl & Gaynor’s McCormick said.

“If I was a Citi shareholder, I would expect to see increased volatility, more government stimuli and a possible merger or acquisition,” McCormick said. Any government aid would be dilutive to stockholders, he said.

Pandit and three deputies who bought about 1.3 million Citigroup shares last week in a show of confidence already are sitting on paper losses. Pandit bought 750,000 shares at an average price of $9.25 apiece. At yesterday’s closing price, they’re worth about $3.41 million less.

Parsons, the 60-year-old lead director and chairman of Time Warner Inc., bought 35,000 shares this week for an average price of $8.15, Citigroup said yesterday in a regulatory filing.

The stock “is for speculative investors,” McCormick said. “Let’s face it.”

To contact the reporters on this story: Bradley Keoun in New York at bkeoun@bloomberg.net; Christine Harper in New York at charper@bloomberg.net.
Last Updated: November 21, 2008 09:03 EST

[文静]

纽约股市20日收盘时，花旗股价重挫26%，收于每股4.71美元，为1993年2月以来的最低价。此时的纽约，董事会正在开会讨论拍卖部分业务甚至将公司全盘出售的可能性，以重振投资者信心。

很难想象，一个没有了花旗的银行业。

[yolanda]

难道不只是"又一家"银行吗?

[文静]

新闻真是出得非常快...

THE WALL STREET JOURNAL
(November 24, 2008)

[b]U.S. Agrees to Rescue Struggling Citigroup [/b]
Plan Injects $20 Billion in Fresh Capital, Guarantees $306 Billion in Toxic Assets
By DAVID ENRICH, CARRICK MOLLENKAMP, MATTHIAS RIEKER, DAMIAN PALETTA and JON HILSENRATH

The federal government agreed Sunday night to rescue Citigroup Inc. by helping to absorb potentially hundreds of billions of dollars in losses on toxic assets on its balance sheet and injecting fresh capital into the troubled financial giant.

The agreement marks a new phase in government efforts to stabilize U.S. banks and securities firms. After injecting nearly $300 billion of capital into financial institutions, federal officials now appear to be willing to help shoulder bad assets, on a targeted basis, from specific institutions.

Citigroup is one of the world's best-known banking brands, with more than 200 million customer accounts in 106 countries. Its plunging stock price threatened to spook customers and imperil the bank.

If the government's rescue plan is a success, it could help bring stability to the entire financial system. If it doesn't, even deeper doubts about the industry's future could spread.

After a weekend of marathon talks between Citigroup executives and top federal officials, the parties late Sunday night nailed down a package in which the government will help protect the company from its riskiest assets.

Under the plan, Citigroup and the government have identified a pool of about $306 billion in troubled assets. Citigroup will absorb the first $29 billion in losses in that portfolio. After that, three government agencies -- the Treasury Department, the Federal Reserve and the Federal Deposit Insurance Corp. -- will take on any additional losses, though Citigroup could have to share a small portion of additional losses.

The plan would essentially put the government in the position of insuring a slice of Citigroup's balance sheet. That means taxpayers will be on the hook if Citigroup's massive portfolios of mortgage, credit cards, commercial real-estate and big corporate loans continue to sour.

In exchange for that protection, Citigroup will give the government warrants to buy shares in the company.

In addition, the Treasury Department also will inject $20 billion of fresh capital into Citigroup. That comes on top of the $25 billion infusion that Citigroup recently received as part of the the broader U.S. banking-industry bailout.

The government and Citigroup had hoped to unveil the plan early Sunday evening, but negotiations dragged on longer than expected. Treasury Secretary Henry Paulson began briefing Congressional leaders about the plan later in the evening.

Asian markets were mostly lower in early Monday trading as news of the discussions surfaced. Japan's markets were closed for a holiday.

The sweeping rescue plan underscores how concerned the government had become about letting Citigroup's fortunes continue to deteriorate. The company has been pounded by mortgage-related losses and is on track to suffer further from the weakening economies in the U.S. and around the world.

Last week, with Wall Street rapidly losing confidence in the company, its shares tumbled 60% to a 16-year low. Still, Citigroup Chief Executive Vikram Pandit and other top executives insisted last week that the company remained on solid financial footing.

While Citigroup's recent woes don't appear to be as severe as the problems that ultimately felled Bear Stearns Cos. and Lehman Brothers Holdings Inc., the U.S. government seems to have decided it can't afford to gamble on whether Citigroup will weather the storm.

At the same time, the Treasury Department is already facing a political backlash over the use of taxpayer funds to stabilize the banking sector, and has nearly exhausted the $350 billion that Congress allotted to the first phase of the industry rescue.
The planned arrangement with Citigroup appears to be an attempt to thread that needle by giving the company some breathing room until markets calm.

In addition to $2 trillion in assets Citigroup has on its balance sheet, it has another $1.23 trillion in entities that aren't reflected there. Some of those assets are tied to mortgages, and investors have worried they could cause heavy losses if they are brought back on the company's books.

Even as they assured employees and investors last week that the company was on sound financial footing, Citigroup executives and directors knew they needed to do something fast to stabilize their company. Top government officials, including the heads of the Treasury Department and the Fed, also started scrambling to draw up contingency plans in case Citigroup's troubles intensified.

The assets affected under the government plan are largely loans and securities backed by residential and commercial real estate. Such assets have been devastated by the meltdown of the housing markets and have started coming under even greater strain in recent weeks as the U.S. economy slows.

"With these transactions, the U.S. government is taking the actions necessary to strengthen the financial system and protect U.S. taxpayers and the U.S. economy," the Treasury Department, Fed and FDIC said in a joint statement issued late Sunday.

Even as they assured employees and investors last week that the company was on sound financial footing, Citigroup executives and directors knew they needed to do something fast to stabilize their company. By Friday, bank officials were hoping for a public expression of confidence from the government, believing that would help reassure clients and customers.
Top government officials, including the heads of the Treasury Department and the Fed, also started scrambling to draw up contingency plans in case Citigroup's troubles intensified.

On Sunday evening, government officials were locked in meetings to hammer out the final terms of an arrangement that will leave the government deeply enmeshed in the inner workings of one of the world's largest financial institutions.
The government didn't require Citigroup to make changes to its executive ranks or its board in return for government assistance. However, Citigroup agreed to "comply with enhanced executive compensation restrictions," the government said Sunday, and also will implement a government-backed plan to modify distressed mortgages that is designed to curb foreclosures.

Despite the unprecedented scope of the rescue plan, it's not clear whether it will be enough to stabilize Citigroup. The roughly $300 billion pool of assets that are included in the rescue plan represent only a sliver of the company's more than $3 trillion in assets, including its holdings in off-balance-sheet entities.

Jitters about such "hidden" assets helped trigger the nose-dive in Citigroup's stock last week. Among the off-balance-sheet assets are $667 billion in mortgage-related securities.

Citigroup has tried repeatedly to rid itself of its exposure to those assets -- and nearly hammered out a similar arrangement with the government nearly two months ago.

In late September, the company reached an agreement for a government-financed acquisition of Wachovia Corp. Under that planned deal, Citigroup and the government were going to divvy up the losses on $312 billion of assets, with Citigroup absorbing the first $30 billion in losses and the government shouldering the remainder.

Citigroup described that arrangement as intended to insulate it from Wachovia's risky mortgage assets. But Citigroup also would have been able to unload some of its own assets, according to people familiar with the matter.

That deal unraveled in less than a week, after Wells Fargo & Co. emerged with a higher bid that didn't require direct government backing. That deprived Citigroup not only of a way to dump its risky assets but also of a deep pool of deposits, which would have substantially strengthened its access to stable low-cost funding.

Shortly after the Wachovia deal fell apart, Citigroup pitched the idea to the government of it helping to protect the company against some of its losses. Citigroup executives argued that the government should help the company after Wachovia slipped away, according to a person familiar with the matter. But federal officials balked at the idea.

As recently as one month ago, Citigroup had hoped to be able to unload some of those assets to the U.S. government through its Troubled Asset Relief Program, according to people familiar with the bank's plans. But when Treasury Secretary Paulson earlier this month shelved plans to use TARP to purchase banks' bad assets, that option vanished.

Last Monday, Mr. Pandit said in a meeting with employees that Citigroup was scrapping plans to try to sell about $80 billion in risky assets. Investors and analysts interpreted the move as a sign that Citigroup either was unable to sell the assets, or would have had to incur hefty losses in the process.

Two days later, Citigroup announced it was buying $17.4 billion in assets from its structured-investment vehicles -- complex entities whose holdings included risky mortgage-linked securities -- and faced a $1.1 billion loss due to their diminished values.

The back-to-back moves, coupled with existing fears about Citigroup's massive off-balance-sheet holdings, stoked investor fears that Citigroup could be swamped by toxic assets flooding back onto its books. That helped ignite the current panic, which was exacerbated by a drumbeat of bleak economic news.

Government officials could face requests from other banks for similar help shoring up their balance sheets. Banks, hedge funds, and private equity firms have urged Capitol Hill and government officials to restart the asset-purchase program in recent weeks.

"The problem is that other banks would want to get in line" for such government support, says Thomas B. Michaud, a vice chairman of investment bank Keefe, Bruyette & Woods Inc. "Is there enough money to do that?"

[文静]

美国金融业在全球市场经济中的地位是否将不可逆转的丧失？虽然盛极而衰是自然规律，但是这种转化的速度超出了所有人的想象。透过这些纷繁复杂的现象：次贷，杠杆，衍生产品...什么是这次危机的本质原因呢？是人性的贪婪导致了经济繁荣的过度预支？是企业运作中管理层的道德风险？

[Lee]

自20世纪90年代以来随着苏联东欧社会主义阵营的瓦解和中国越南等社会主义国家的转向市场经济使资本主义在其对手日趋式微的形势下自然感到历史已经终结且从此资本主义一统天下而日趋大胆和放肆，窃以为此次金融危机应放在此一背景下予以审视。敌人一旦消失，自身必出问题，天下事了犹未了，既济之后继之未济，就让我们且拭目以待随之而来的世界政治经济的相应变化罢。

[文静]

Lee一下子就站在了一个高度上看这个问题，呵呵。

我也联想到，资本主义是建立在人性本恶的假设上，社会主义建立在人性本善的假设上。究竟哪种制度更切合人类社会实际，似乎还没有定论。

[Lee]

性善性恶，姓资姓社，确乎难言，故[quote="文静"]究竟哪种制度更切合人类社会实际，似乎还没有定论。[/quote]我辈做学问，要紧的是“去贪嗔痴，求勾股弦”（金克木语）。我只是在看矛盾双方生克冲合的内外转化。忽然想到郎咸平近些年大量谈及的国内国际经济诸问题，往往谈言微中，然对此或推崇或不屑，忽悟原来郎乃站在民族资产阶级的立场上在一定程度上反对国内官僚资产阶级和国际垄断资产阶级而替民族资产阶级说话（用语有些陈旧，意思大概明白就行）。由此可知熙来攘往，皆为利往，思想和理论往往服务于其利益之所在。OK！话说回来，值此金融危机席卷世界而前景不明之时，真真觉得需要“建设一个新世界”。

[yijun]

开个玩笑，印证了一句网络名言，“只有社会主义才能救美国”。
前港督彭某说得白，中国对于西方国家最大的威胁，不是它的经济力量的强大，而是它的一个示范，示范即使采用非西方制度，也能够得到经济的发展。这种示范如果在世界范围起作用，那才是西方政治体系的噩梦。
中国似乎也了解西方这个心理，所以紧抱美国老大的大腿，。。。
中西如此微妙的肉搏关系，确实有意思。

[yijun]

确实，“现代化”已经不是一条路了，现在谈“科学发展观”很狭隘。
唯有希望新世界的诞生，少伴随血腥。