Transcripts

The Citigroup Sell Off

SUSIE GHARIB: More worries today about the future of Citigroup. The big bank's shares hit a 16- year low as the board met to weigh options for its future. Erika Miller looks at what's at stake for the firm that was once the jewel in the crown of investment banking.

ERIKA MILLER, NIGHTLY BUSINESS REPORT CORRESPONDENT: This is a Citi under siege. But Wall Street is betting if Tim Geithner is the next Treasury secretary, the bank will survive. Citi shares recovered some ground this afternoon on reports of Geithner's nomination, although the stock still ended down sharply. Analysts say the immediate concern is a mass exodus of the bank's trading partners and customers. Standard & Poor's analyst Stuart Plesser says the turmoil stems from the Treasury's decision not to buy troubled mortgage assets as part of its rescue plan.

STUART PLESSER, BANKING ANALYST, STANDARD & POOR'S: The fact that the government changed its plan on the TARP program to now not buy distressed assets really hurt Citi in a large degree because the market for these securities has closed up and prices have probably come down even further, making it difficult for Citi to shed these assets.

MILLER: Given the current crisis of confidence at Citi, it seems remarkable that less than two months ago, the firm was viewed a possible savior for troubled Wachovia. Now the question is whether Citi will have to find a buyer for itself. All along, Citi has insisted it does not want to sell off pieces and that it has a solid business model and ample capital. Still the burning question remains: is bankruptcy a possibility? The government let Lehman Brothers fail. Would it be willing to let Citi collapse as well?

PLESSER: I don't think the government would like to see a bankruptcy of this magnitude in the financial space, particularly after what they are trying to do with all their TARP money. It would likely, if it comes to that, the government will need to move in and see what it can do to either broker a deal with someone else or put up money of their own or backstop some of the downside that the companies see in Citi.

MILLER: For his part, Ladenburg Thalmann analyst Dick Bove sees no reason Citi should fold. In a report today, he said quote, it would take a depression every bit as large and as long as the 1930s debacle to shake this company's viability. Unless the Treasury rescue plan changes again, analysts say the major problem in the sector remains: too many toxic mortgage assets and no one who will buy them. Erika Miller, NIGHTLY BUSINESS REPORT, New York.