By Pam Martens and Russ Martens: November 7, 2023 ~
Jane Fraser, Citigroup CEO
On the very first day of trading in January 2007 (the year prior to the Wall Street monetary crisis in 2008 that saw century-old renowned monetary companies take off one after another), Citigroup closed the trading day at $55.25. The other day, Citigroup’s typical stock closed at a reliable share rate of $4.20.
Citigroup did a 1-for-10 reverse stock split on Might 9, 2011. That indicates that financiers holding 100 shares of Citigroup back in January 2007 saw their position diminish to 10 shares after Might 9, 2011. So the other day’s closing rate of $42.04 for Citigroup is successfully $4.20 for long-lasting investors, changing it for the reverse stock split.
To put that in even starker terms, financiers who have actually kept this pet for practically 17 years have actually enjoyed 92 percent of its share rate disappear.
More alarming news on Citigroup came the other day with a report at CNBC showing that Citigroup might cut as numerous as 24,000 staff members, or 10 percent of its labor force of 240,000.
The huge concern is, what in the world is Citigroup finishing with that numerous employees in the very first location?
According to information from the Federal Reserve Board of Governors, Citigroup’s federally-insured bank, Citibank, ranks as the 3rd biggest U.S. bank by properties. Since June 30, according to the Fed, Citibank had simply 660 domestic bank branches versus 3,803 domestic bank branches for the 2nd biggest bank by properties, Bank of America. (See the Fed information at this link)
According to Bank of America’s 10-K (Yearly Report) for year-end 2022, it used 217,000 employees, practically 10 percent less than Citigroup’s Citibank while having 5.76 times the variety of domestic bank branches.
In addition, Bank of America owns the huge retail brokerage company, Merrill Lynch, which since August of 2022 was staffing 560 different branch workplaces according to AdvisorHub. Citigroup offered its retail brokerage operation (Smith Barney) to Morgan Stanley following the monetary crisis in 2008.
Federal regulators are most likely thoroughly keeping an eye on the circumstance at Citigroup due to the fact that the bank blew itself up in 2008 with poisonous subprime financial obligation bombs living off its balance sheet and complex derivatives. Citigroup’s stock traded at 99 cents in March 2009. It took $2.5 trillion in secret cumulative loans from the Fed from December 2007 to July 2010 to resuscitate Citigroup’s sinking hulk. (An audit of the Fed’s secret emergency situation bailout centers by the Federal government Responsibility Workplace exposed this info to the American individuals in July 2011.)
This is how we reported the circumstance at Citigroup on November 24, 2008 in the middle of the worst Wall Street crash given that the Great Anxiety:
” Since last Friday’s close, Citigroup had $2 trillion in ‘properties’ and $20.5 billion in stock exchange worth, highly recommending the term ‘properties’ is a misnomer on Wall Street. Late last night the U.S. federal government accepted dispose numerous billions more into this great void with no survival strategy needed of the business as required of the vehicle makers: obviously if you make those four-wheel devices that get us to work you’re suspect; if you produce losses in muddled derivatives, you’re great to go.
” Citigroup’s five-day death spiral recently was surreal. I understand 20-something newlyweds who have much better monetary backup strategies than this international banking giant. On Monday came the City center conference with staff members to reveal the sacking of 52,000 employees. (Aren’t City center conferences expected to impart self-confidence?) On Tuesday came the statement of Citigroup losing 53 percent of an internal hedge fund’s cash in a month and bringing $17 billion of properties that had actually been hiding in the Cayman Islands back onto its balance sheet. Wednesday brought the cheerful news that a law practice was declaring that Citigroup marketed something called the MAT 5 Fund as ‘safe’ and ‘protected’ just to enjoy it lose 80 percent of its worth. On Thursday, Saudi Prince Walid bin Talal, from that visionary nation that will not let females drive automobiles, advance to assure us that Citigroup is ‘underestimated’ and he was purchasing more shares. Not having any Princes of our own, we tend to associate them with fairy tales. The next day the stock dropped another 20 percent with 1.02 billion shares altering hands. It closed at $3.77.
” Entirely, the stock lost 60 percent recently and 87 percent this year. The business’s market price has actually now fallen from more than $250 billion in 2006 to $20.5 billion on Friday, November 21, 2008. That’s $4.5 billion less than Citigroup owes taxpayers from the U.S. Treasury’s bailout program.
” Likewise completing the week’s news on Friday was the discovery that after getting $25 billion of taxpayer cash, Citigroup would continue to honor its $400 million, 20-year dedication and pay an installation of $20 million to have the brand-new Mets’ baseball arena called Citi Field. (Flashback: April 7, 1999: Enron consents to pay more than $100 million over thirty years to call a Houston arena Enron Field.)”
Among the crucial elements that might be making Citigroup’s federal regulators worried today is its enormous quantity of uninsured deposits.
In a speech provided by FDIC Chairman Martin Gruenberg on October 4, he made it really clear that the FDIC is worried about both the overall quantity of uninsured deposits in the U.S. banking system and the concentration of those uninsured deposits amongst a handful of mega banks.
Gruenberg kept in mind in his speech that year-end information for the 3 banks that failed this previous spring revealed that anywhere from 90 percent to 70 percent of their deposits were uninsured. (Throughout a banking panic, uninsured deposits normally make the fastest beeline for the exits.)
According to federal banking reports submitted with regulators for the quarter ending June 30 (call reports), the 4 biggest U.S. banks by properties (JPMorgan Chase Bank, Bank of America, Citibank and Wells Fargo) represented $4.185 trillion of uninsured deposits, or 59 percent of all uninsured deposits at all 4,645 federally-insured organizations.
Citibank shows in its call report for June 30 that 85.5 percent of its $1.338 trillion in overall deposits are uninsured. The breakdown is as follows: It has $548.33 billion in uninsured deposits in its domestic workplaces plus $595.4 billion in deposits in foreign workplaces. (The FDIC does not guarantee deposits on foreign soil.) Those 2 figures tally approximately $1.144 trillion in deposits doing not have FDIC insurance coverage out of an overall deposit base of $1.338 trillion.
The breakdown for the other 3 mega banks since June 30 are as follows: 59 percent of JPMorgan Chase’s deposits do not have FDIC insurance coverage; 49 percent at Bank of America; and 51 percent at Wells Fargo.
Deposits in domestic bank workplaces in the U.S. that go beyond $250,000 per depositor/per bank are not guaranteed by the FDIC.
The incredible quantity of uninsured deposits at the mega banks is not an issue for the large bulk of federally-insured banks in the U.S. according to Gruenberg. In his speech on October 4, he stated that “Since December 2022, more than 99 percent of bank account were under the $250,000 deposit insurance coverage limitation.”