Life is a Carnival: Citi that slips!!!

There is one bank that has been humbled big time, the “Citi Group”. This mighty corporation in its peak controlled assets more than $ 2,000 billion with operations across all major verticals in the financial services such as investment banking, Asset Management and Retail Banking. There juggernaut rolled in more than 100 countries including India with a touch of arrogance. The share price plummeted to levels less than $ 4 per share.

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This organization, born out of a celebrated merger between Citicorp and Travelers was always considered to big to fall. The bank had been reeling under heavy losses before it got an equity infusion. It had also experienced a failed bid to buy Wachovia few weeks earlier. The Wachovia deal had been a chance to strengthen Citi in critical areas - the deposit base and its commercial banking operation. With the lost bid it also lost a chance to improve its market share, something JP Morgan had done.

Unlike Lehman Bros, the Citi managed to convince US treasury secretary Hendry Paulson and managed to get government aid that includes equity infusion of $ 20 billion, this is above the $ 25 billion that Citi received earlier. They also managed to get a backstop facility of $ 306 billion in guarantees from the US treasury. This bailout for one corporation is estimated to be double than the total market capitalization of all the banks in India. Mr. Chidambaram, India’s Finance Minister had announced a $ 12 billion loan waiver in his budget for small farmers in India. The Capitalist had argued that this bailout would lead to more inefficiency in the system. These people fail to realize that Indian farmers are paying a price for due to absence of a good agri-Infrastructure in country and not because of their greed as in case of these bankers.

Its CEO Vikram Pandit came out in public saying that they had gone wrong with their huge lending towards real estate. And he also added that it’s a lot easier to get into these situations than getting rid of them.