The market might believe that Citi can’t survive the balance sheet writedowns in its future, but at the moment, it’s still got the financial characteristics of a vaguely healthy bank. The catalyst here is the stock price, not a bank run.
It puts the Feds in an awkward spot, notes CNBC’s Charlie Gasparino:
As of Saturday afternoon, the general consensus between officials from Citi and government officials from the US Treasury department and US Federal Reserve is that the government will not takeover Citigroup in the way it took control of AIG—by lending the firm massive amounts of money and in return assuming a huge equity position.
Government officials fear taking over Citigroup would create a precedent: Unlike AIG, Citigroup’s balance sheet is relatively healthy, with relatively strong levels of capital particularly compared to most of its competitors.
Still, officials from the Treasury and Citigroup are unsure what it would take to restore confidence in the company, including a possible smaller capital injection or some sort of statement that Citigroup is financially sound.
For that reason, Citigroup officials are continuing to explore possible merger possibilities and a spin off of some of Citigroup’s businesses, even as CEP Vikram Pandit publicly stated the sale of the firm’s massive and coveted broker business, Smith Barney is off the table, these people say.
To see if there was any panic yet among Citi’s retail banking customers, we checked in on the chatter at Twitter. So far, there’s very little worrying (unlike the last days of WaMu), instead it’s mainly people talking about the Somali Pirates taking over.
Citi In Talks With Fed, Treasury
Business Insider Emails & Alerts
Site highlights each day to your inbox.