Citigroup talks with US Government as bankruptcy looms

| 22 November 2008 01:58

Reuters is reporting that persons familiar with the matter have indicated that Citigroup began talks with the U.S. Government as contingency planning. With Citigroup’s share price having plunged dramatically in recent days, rumors have been circulating about the firm. Yesterday, the Board of Directors met to discuss strategic options including a sale of all or part of the firm. It is now evident that the government may need to get involved.

Citigroup Inc has begun talks with the U.S. government as its plummeting share price raises doubts about the bank’s ability to survive, a person familiar with the matter said.

The bank has met with officials from the Federal Reserve and the U.S. Treasury Department in recent days to discuss its options, which include an endorsement from the government and another capital injection from the Treasury, the person said, requesting anonymity because he is not authorized to speak to the press.

The bank’s management has also internally discussed selling off units or finding another bank to merge with. But it is not clear if anything short of capital from the government will soothe markets that are increasingly questioning whether Citigroup has enough capital to withstand the recession, the person said.

Citigroup spokeswoman Christina Pretto declined to comment.

Citigroup’s shares lost 20 percent of their value on Friday, closing at $3.77, down 60 percent for the week and reaching their lowest level since December 1992.

All of this makes you wonder how Sheila Bair could have allowed Citi to take over Wachovia or how Citi is bidding to takeover Chevy Chase Bank. Obviously, this is a firm in dire straits.

See the links below for more details.

Source
Citigroup talking to U.S. government as shares dive: source – Reuters

avatar About Edward Harrison

Edward Harrison is the founder of Credit Writedowns and a former career diplomat, investment banker and technology executive with over twenty years of business experience. He is also a regular economic and financial commentator on BBC World News, CNBC Television, Business News Network, CBC, Fox Television and RT Television. He speaks six languages, a skill he uses to provide a more global perspective. Edward holds an MBA in Finance from Columbia University and a BA in Economics from Dartmouth College.

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