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Fallout: The Financial Crisis

Is Citigroup really in better shape?

Jeremy Hobson Mar 10, 2009
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Fallout: The Financial Crisis

Is Citigroup really in better shape?

Jeremy Hobson Mar 10, 2009
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TEXT OF STORY

Kai Ryssdal: First things first. It’s important to point out that what Citigroup said today wasn’t exactly official in the SEC sense of the word. CEO Vikram Pandit broke the news of the black ink in an internal e-mail to Citi staffers. Word got out as word tends to do. And good news of any kind out of the financial sector was all Wall Street needed to hear. So thank Citigroup for today’s 379 point bounce on the Dow. I’m sure they’ll appreciate it because I don’t think they’ve been getting many thank you’s lately. But, and seriously you knew there’d be a ‘but’ here, you have to bear in mind Pandit didn’t talk about all those troubled assets Citi still has to keep marking down. Marketplace’s Jeremy Hobson reports from New York.


JEREMY HOBSON: That’s right, Pandit’s memo left out what he calls externally disclosed marks. Those are the company’s troubled assets that keep getting marked down. With Citi still trading below $2 a share, his cheerleading sounded positively Pythonesque. It was like the fight scene in the Holy Grail, where the black knight denies he’s been seriously hurt.

Black Knight: Tis but a scratch.

Arthur: A scratch? Your arm’s off.

Black Knight: No it isn’t.

Arthur: Well, what’s that then?

Black Knight: I’ve had worse.

Pandit claims Citi is having its best quarter since late 2007. Eileen Fahey is a managing director at Fitch Ratings. She says anyone who takes the memo as a sign we’ve hit bottom is reading too much into it.

EILEEN FAHEY: I think that that seems very optimistic, particularly compared to yesterday’s stories.

Like the ones about powerful lawmakers recommending some of the nation’s big banks be allowed to fail. As for Citi’s current credit rating from Fitch, Fahey says…

FAHEY: Currently, they’re a single A-plus rating. That is, though, highly dependent on the government support.

There are plenty of believers in Citi out there. Anton Schutz is one. He’s President of Mendon Capital Advisors, which has Citi stock in one of its funds.

ANTON SCHUTZ: Maybe I’m one of the few people not surprised or shocked, but I thought all the actions cumulatively were going to eventually add up here.

He says Citi has sold off some of the best parts of its business and has already marked down its assets significantly. So why not include those externally disclosed marks?

SCHUTZ: You know, the marks move all over the place. But you know, really when the marks matter is the end of the quarter.

April 17th in Citi’s case, which is when investors and employees will get, as the late great Paul Harvey would say, the rest of the story.

In New York, I’m Jeremy Hobson for Marketplace.

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