CITI C posted losses over four times its recent loss reserve for the quarter. The dividend was cut as well as 4,200 jobs. Read this article about the E/S or rather the lack thereof. Note the original estimates of losses versus the actual loss. Note how both brokerage and bank firms are scrambling all over the world to raise capital. Note that CITI plans to sell $2 B of convertible preferred stock. I specifically discussed this today i intermediate accounting. It was no accident that I had picked this exact company. Why would CITI sell convertible preferred stock (by the way would you care to buy some?)? Note that they are going to sell even more preferred than that, at least that is the plan.
What does it mean when the article states that CITI boosted loan los reserves by $4.1 B? What did this signal to investors? How much faith could no make that should investors have put in that estimate? Note that, as I showed in class today, investors are pounding not only CITI but the entire bank and brokerage sector for their behavior.
Robert Rubin is the Chairman of the Board of CITI. After all that has been said about corporate greed, how about a bit of gee I am sorry from Robert. He claimed to have been a Wall St genius when he was Treasury Secretary, now the idol appears to have clay feet. Gee, where is the apology?
This semester we will study the computation of E/S. This article is an excellent example of why this is such an importat number for ivestors, just ask Robert Rubin. It is surely the height of irony that Barney Frank writes an article in the WSJ calling for more regulation when the former Secy of Treasury is atop one of the biggest disasters on Wall Street……
Professor Elam 
Leave a comment