Word: citigroup
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...case that the equity value of firms including Citigroup(C) and Bank of America (BAC) has dropped to nothing is compelling. Once the government said it would back losses of over $300 billion from the Citi balance sheet, it was a tacit way of saying that Citi was no longer independent. Its market cap is now down to $15 billion, and at $2.80 its stock is a day-trader's dream...
...only are the Citigroup shareholders likely to be out of luck, especially if the Fed, Treasury, and FDIC have to step in again, but most of the preferred shareholders and debt holders will be wiped out in the flood as well...
...passed tens of billions of dollars of loans to banks and brokerages through its emergency lending window. It has lowered interest rates to zero. Treasury has put $25 billion into each of the money center banks. It is now backing over $300 billion in bad assets held by Citigroup (C) through a loss-sharing agreement. Bank of America (BAC) is getting a similar deal. The programs to back bad assets is almost certainly going to spread. (See pictures of TIME's Wall Street covers...
...rehabilitation and restructuring of Citigroup (C) was supposed to take months, or maybe a year. The big bank got a cash infusion when it sold a part of Smith Barney to Morgan Stanley. The plan for the creation of a new Citi was based on its ability to limit its losses so that it could buy time to unload other parts of its family of financial companies...
...Most troubling to the financial markets is the ongoing question surrounding the nation's biggest banks, including reports that Bank of America's acquisition of Merrill Lynch is shaky and that BofA will need billions more in federal assistance. Meanwhile, Citigroup is trying to stay one step ahead of the sharks, er, shorts, who have taken the stock down more than 20% in the past two days. Though Citi is moving aggressively to hive off assets and divisions - earlier this week it announced the merger of its Smith Barney brokerage unit with Morgan Stanley's Global Wealth Management division...