This is a great lesson in why the govt should not get directly involved in the affairs of the market.
Despite the fact that Uncle Sam has provided $45 billion of taxpayer money to Citigroup over the last few months, Citigroup’s market value fell to about $5.5 billion today. What this simply means is if Citi were to be liquidated today, the govt would lose $40 billion, and this is just the govt, not other investors. Bloomberg
Citigroup Inc. dropped below $1 in New York trading for the first time, the latest sign that stock investors are losing confidence in a company that was once the world’s biggest bank by market value.
The stock fell to 99 cents at 11:22 a.m. on the New York Stock Exchange, marking an 85 percent decline this year and giving the company a market value of $5.5 billion. At its peak in late 2006, Citigroup stock was worth $55.70, giving the company a market value of $277.2 billion.
Citigroup has reported more than $37.5 billion in net losses during the last five quarters and the U.S. government has provided the company with $45 billion. Last week, the government agreed to convert the preferred stock it owned in Citigroup to common shares, gaining a 36 percent stake in the company and boosting its buffer against future losses.
Citigroup was created by the 1998 combination of Citicorp and Travelers Group Inc., which with a value of $85 billion was the largest merger in history at the time. The transaction helped persuade the U.S. government to repeal a Great Depression-era law, the Glass-Steagall Act, that prohibited banks that took consumer deposits from engaging in investment-banking activities.
