US keen to restore confidence in Citigroup

Government officials in the US worked through the weekend on plans to shore up confidence in the future of Citigroup, the financial giant whose shares cratered last week.

Talks centred on a scheme for American taxpayers to absorb future losses on Citigroup's riskiest investments, in return for an increased stake in the company. One plan involved the creation of a government-guaranteed "bad bank" into which billions of dollars of assets would be transferred.

Citigroup has assets of more than $2 trillion and was handed $25bn last month as part of the US government's Wall Street bailout plan, but after four consecutive quarters of losses, analysts believe it still needs to raise more money to cover write-downs to come on its remaining mortgage investments and customer loans.

Its shares plunged by 60 per cent last week, generating headlines that alarmed executives, who feared a full-blown crisis of confidence that could destabilise the operations of the bank.

Timothy Geithner, the president of the New York Federal Reserve bank, who will be announced today as President-elect Barack Obama's first Treasury secretary, was among the senior government officials working on the rescue package, as Citigroup rolled out new adverts yesterday aimed at soothing public and client fears.

On both sides of the Atlantic, customer deposits are protected by government insurance schemes, and Citigroup has access to funds from the Federal Reserve to meet liabilities to clients, making its situation substantially different to that of Lehman Brothers or Bear Stearns, which collapsed earlier this year. However, there are concerns over the effect on the wider financial system, should a rescue package not be forthcoming for Citigroup, given the depth of its retail and investment banking operations.

"The basic parts of Citigroup are good, solid and money-making," said the New York Senator Charles Schumer. "Top leaders are talking this weekend and they are confident they can come up with a plan that ensures Citi's viability. When you have a major institution, which has tentacles everywhere, if you let it go down then millions of innocent people get hurt."

The Citigroup board has been examining whether sacking the chief executive, Vikram Pandit, might restore confidence, or whether the company should ask for another injection of funds from the US government.

"Hopefully it will be a positive news story – the market will take anything at this point," said Joe Saluzzi, the co-manager of trading at Themis Trading in New Jersey. "If we get nothing out of Citi, we have a little bit of a problem."

Start your day with The Independent, sign up for daily news emails
ebooks
ebooksA special investigation by Andy McSmith
  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Ashdown Group: Editor-in-chief - Financial Services - City, London

£60000 - £70000 per annum + benefits : Ashdown Group: A highly successful, glo...

Guru Careers: Pricing Analyst

£30 - 35k (DOE): Guru Careers: We are seeking a Pricing Analyst with experienc...

Ashdown Group: Treasury Assistant - Accounts Assistant - London, Old Street

£24000 - £26000 per annum + benefits : Ashdown Group: A highly successful, glo...

Ashdown Group: Sales Team Leader - Wakefield, West Yorkshire

£21000 - £24000 per annum: Ashdown Group: The Ashdown Group has been engaged b...

Day In a Page

Revealed: Why Mohammed Emwazi chose the 'safe option' of fighting for Isis, rather than following his friends to al-Shabaab in Somalia

Why Mohammed Emwazi chose Isis

His friends were betrayed and killed by al-Shabaab
'The solution can never be to impassively watch on while desperate people drown'
An open letter to David Cameron: Building fortress Europe has had deadly results

Open letter to David Cameron

Building the walls of fortress Europe has had deadly results
Tory candidates' tweets not as 'spontaneous' as they seem - you don't say!

You don't say!

Tory candidates' election tweets not as 'spontaneous' as they appear
Mubi: Netflix for people who want to stop just watching trash

So what is Mubi?

Netflix for people who want to stop just watching trash all the time
The impossible job: how to follow Kevin Spacey?

The hardest job in theatre?

How to follow Kevin Spacey
Armenian genocide: To continue to deny the truth of this mass human cruelty is close to a criminal lie

Armenian genocide and the 'good Turks'

To continue to deny the truth of this mass human cruelty is close to a criminal lie
Lou Reed: The truth about the singer's upbringing beyond the biographers' and memoirists' myths

'Lou needed care, but what he got was ECT'

The truth about the singer's upbringing beyond
Migrant boat disaster: This human tragedy has been brewing for four years and EU states can't say they were not warned

This human tragedy has been brewing for years

EU states can't say they were not warned
Women's sportswear: From tackling a marathon to a jog in the park, the right kit can help

Women's sportswear

From tackling a marathon to a jog in the park, the right kit can help
Hillary Clinton's outfits will be as important as her policies in her presidential bid

Clinton's clothes

Like it or not, her outfits will be as important as her policies
NHS struggling to monitor the safety and efficacy of its services outsourced to private providers

Who's monitoring the outsourced NHS services?

A report finds that private firms are not being properly assessed for their quality of care
Zac Goldsmith: 'I'll trigger a by-election over Heathrow'

Zac Goldsmith: 'I'll trigger a by-election over Heathrow'

The Tory MP said he did not want to stand again unless his party's manifesto ruled out a third runway. But he's doing so. Watch this space
How do Greek voters feel about Syriza's backtracking on its anti-austerity pledge?

How do Greeks feel about Syriza?

Five voters from different backgrounds tell us what they expect from Syriza's charismatic leader Alexis Tsipras
From Iraq to Libya and Syria: The wars that come back to haunt us

The wars that come back to haunt us

David Cameron should not escape blame for his role in conflicts that are still raging, argues Patrick Cockburn
Sam Baker and Lauren Laverne: Too busy to surf? Head to The Pool

Too busy to surf? Head to The Pool

A new website is trying to declutter the internet to help busy women. Holly Williams meets the founders