Citigroup Tries to Stop the Drop in Its Share Price

For months, the nation’s largest banks have struggled to regain investors’ trust. In the center of the vortex is Citigroup, whose precipitous stock-market plunge accelerated on Thursday, sending shock waves through the financial world.

The shares slumped 26 percent Thursday; the bank has lost half its value in just four days. The chief executive, Vikram S. Pandit, will hold a meeting for senior managers Friday to update them on the bank’s condition.

Investors and analysts have long pressured the bank to consider ways to lift its stock price, including splitting the company or selling pieces. While a few also say the company should consider selling itself outright, there is no certainty that any change would happen soon. Senior executives say the company is financially strong and has ample financing options. Moreover, there are few buyers who would be willing to pay a price that Citigroup would want for its most valuable assets.

Citigroup executives are seeking to stabilize the stock price, but at this point they are not actively exploring selling or splitting up the company, according to two people with direct knowledge of the discussions.

The bank has posted four consecutive quarters of losses, caused by billions in write-downs. Nine of its investment funds have cratered this year. And now the bank could face a tsunami of new losses in its once-lucrative consumer loan business as the global economy weakens.

Within the bank’s Manhattan offices, television screens have stopped displaying the company’s stock price. Traders have begun making jokes comparing Citigroup to the Titanic.

But there is a wide gap between what Wall Street investors and Citigroup’s executives believe about the company’s financial condition. Senior executives feel that Mr. Pandit has followed through on plans to aggressively shrink the company and control costs. The bank has sold tens of billions of dollars’ worth of risky assets, improved its capital position and announced plans to eliminate 52,000 jobs by next June. “We are entering 2009 in a strong position, much stronger than we entered in 2008,” Mr. Pandit said in a speech to employees this week. “We will be a long-term winner in this industry.”

Yet as the drumbeat of bad news about the bank grows louder, investors remain unconvinced. Even a decision by Prince Walid bin Talal of Saudi Arabia, who bailed out Citicorp in the 1990s, to raise his stake to 5 percent Thursday failed to restore confidence in the bank. Two senior Citigroup executives said the bank had not approached him about raising his investment. The Saudi prince’s initial investment soared as Citigroup turned out record profits, only to evaporate over the last year.

“The earnings power is there,” said Charles Peabody, a financial services analyst at Portales Partners. “It’s a question of getting through the credit issues.”

Other big banks, like Bank of America and JPMorgan Chase, also tumbled Thursday as the broad stock market sank again, wiping out more than a decade’s worth of gains. And Goldman Sachs, once the most sterling American investment bank, fell below the $53 price at which it went public in 1999.

Investors have long feared that the bad news for banks will get worse as the economy slows. But this latest rout in financial shares, which are now plumbing their lowest depths since the economic crisis broke out, reflects growing concern that banks like Citigroup will require vast sums of additional capital, possibly from the government, to cope with the pain to come.

Home mortgages, credit card loans, commercial real estate debt — all are likely to deteriorate further now that a recession is at hand. Banks that have already lost billions of dollars could lose billions more.

“All the danger signs are flashing red,” said Simon Johnson, a professor at the Sloan School of Management at the Massachusetts Institute of Technology.

Much of the fear centers on the unknowable. It is unclear just how bad banks’ losses on consumer loans, credit cards and mortgages will be as the economy weakens. Commercial real estate loans are deteriorating, and it is unclear whether banks have sold the worst of their holdings. Then there are all the investments that lurk off of banks’ balance sheets, in the so-called shadow banking system. And a new uncertainty has leapt to the forefront as the automotive industry teeters, sending investors scrambling to calculate how much banks are exposed to these loans.

Several big banks hit record lows. Bank of America fell 13.86 percent to $11.25, JPMorgan slid 17.88 percent to $23.38 and Goldman Sachs slumped 5.76 percent to close at $52. Morgan Stanley neared a record low, closing down 10.24 percent at $9.20, while Wells Fargo fell 7.66 percent to $22.53.

In a bid to calm nerves, Citigroup officials are meeting with other large shareholders. Last week, Citigroup’s chairman, Winfried Bischoff, traveled to Dubai and met with Sheik Ahmed bin Zayed al-Nahyan, the director of the Abu Dhabi Investment Authority, according to two executives briefed on the situation.

The renewed assault on financial stocks led the Financial Services Roundtable, an influential lobby group for the industry, to press regulators Thursday for another ban on short-selling, a strategy in which investors bet against declines in a share price.

The current rout appeared to have gained momentum after Treasury Secretary Henry M. Paulson Jr. announced last week that the government would abandon its original plan to purchase troubled bank assets. That sent prices of commercial mortgage bonds and other loans into a nosedive. Mr. Paulson also said the Treasury would let the incoming administration determine how to deploy the remaining $350 billion left in the program.

Yet investors have grown increasingly nervous about the appearance of a leadership vacuum in Washington as the financial markets burn, and some have begun saying that President-elect Barack Obama should move more rapidly to release a plan.

“We really need somebody to step in and show leadership,” said Wilbur L. Ross Jr., chairman of WL Ross and Company, an investment firm that has been looking for bargains in the banking sector. “Every day that’s wasted and that we stay in freefall is going to make the recession that much deeper and longer.”

That has workers in the financial industry bracing for more pain.

“Major financial institutions have been taking write-downs all year, and what do you do next? You lay people off, and that decreases your need for office space,” said Harold Bordwin of the real estate group at KPMG Corporate Finance. “It’s very scary.”

Stocks Drop Sharply and Credit Markets Seize Up

As a new bout of fear gripped the financial markets, stocks fell sharply again on Thursday, continuing a months-long plunge that has wiped out the gains of the last decade.

The credit markets seized up as confidence in the nation’s financial system ebbed and people rushed to put money in Treasuries, the safest of investments. Some markets are now back to where they were before Congress approved the $700 billion financial rescue in October.

The Dow Jones industrial average fell nearly 445 points, or 5.6 percent. The broad market sank to its lowest level since 1997 — before the dot-com boom, the Nasdaq market bust and the ensuing bull market that drove stocks to record heights.

With Thursday’s rout, $8.3 trillion in stock market wealth has been erased in the last 13 months.

Investors are growing increasingly worried that big banks like Citigroup, JPMorgan Chase and Bank of America, which have all received billions of dollars from the government to bolster their finances, are still too weak. The price of Citigroup’s shares plunged 26.4 percent on Thursday and other financial shares fell to fresh lows.

Citigroup, which is under pressure from some investors to split itself or sell businesses, plans to hold a meeting on Friday to update executives on the company’s condition.

The Standard & Poor’s 500-stock index fell 6.7 percent, leaving that benchmark down about 52 percent from its peak in October 2007. The Dow Jones industrial average closed at 7,552.29, barely above its low in October 2002 during the depths of the last bear market. The Nasdaq fell 5 percent, to 1,316.12.

“This is a response to real fear,” said Marc D. Stern, chief investment officer at Bessemer Trust, an investment firm in New York. “We each have to look inside and say, is the fear warranted?”

The fear was reflected in a stampede for the safety of government securities. The Treasury’s benchmark 10-year bill rose 2- 22/32, to 106- 10/32 and the yield, which moves in the opposite direction from the price, was at 3.01 percent, down from 3.32 percent late Wednesday.

The sell-off in equities gathered force over the last several days and brought an abrupt end to what had been a modest improvement in financial markets. After the Federal Reserve began making short-term loans directly to businesses last month, a semblance of normalcy returned to credit markets, and the stock market, although volatile, held above its old lows.

But investor confidence, which has been shaky since the bankruptcy of Lehman Brothers, was dealt a severe blow when the Treasury Department announced last week that it would not buy troubled mortgage assets using the $700 billion that Congress approved in October. Economic reports showing rising unemployment, falling consumer prices and disastrous retail sales compounded the damage. The risk that one or all of the Detroit automakers might go bankrupt added to the gloom.

“The profit drag on corporate America is widening and deepening, and this is leading to more layoffs and cutbacks in capital spending, which is extending and deepening the recession,” said Stuart Schweitzer, global markets strategist for J.P. Morgan Private Bank. “We’ve gotten into a full-blown, self-feeding downturn.”

More bad economic news arrived on Thursday morning the Labor Department reported that new claims for unemployment benefits rose to a seasonally adjusted 542,000 last week, the highest level since July 1992. Unemployment is also climbing at a rapid clip in Europe, and the once-sizzling economies in Asia and Latin America are starting to sputter. Early on Friday, Singapore reported that its third-quarter gross domestic product fell at a 6.8 percent annualized pace.

In Asian trading early Friday, stocks were down nearly 3 percent in Japan, Australia and New Zealand. On Thursday, most European markets closed down more than 3 percent for the day.

The global nature of the slowdown is a reason that oil prices have fallen spectacularly in recent months. On Thursday, oil futures, which had touched $145 this summer, settled below $50 a barrel for the first time since 2005.

The sell-off in markets has been all the more severe because of forced selling by hedge funds, mutual funds, insurance companies and banks, all of which are being compelled to sell at the same time because of pressures from investors, lenders, regulators and rising insurance claims.

There have been spectacular declines in investments like commercial mortgage-backed securities, which are collections of loans backed by shopping malls, office buildings and apartments. Prices of those securities have fallen 20 percent just this month, mostly in response to a report about anticipated defaults on just two loans. The price of insuring against a default on commercial mortgages has more than doubled in less than a week.

“Where the credit markets are trading, it’s all but implying a 1929 scenario,” said Joe Balestrino, fixed income strategist at Federated Investors, who added that he thought prices had fallen too far in many cases.

The troubles in the credit market are not limited to risky assets. The mortgage finance companies Fannie Mae and Freddie Mac, which the government took over in September, have had to pay a steep premium over rates at which the Treasury borrows because policy makers have not explicitly guaranteed their debt.

Investors said the weak condition of many large banks had exacerbated the pain in the financial system because those institutions served as critical intermediaries in the trading of securities, particularly in the credit markets, where securities do not trade on exchanges. Because they need every spare dollar to shore up their own health, those banks are not as willing to make markets in securities that may be even slightly risky.

Shares of Citigroup, for instance, have fallen more than 50 percent this week, to $4.71. Earlier in the week, the bank said it would nearly double previously announced layoffs to 52,000, or 14 percent of its total staff. Other big institutions like Goldman Sachs and Morgan Stanley have been reducing their reliance on borrowed money because they have decided to become bank holding companies subject to regulation by the Federal Reserve.

“They are the middleman, and they have just gotten killed,” Andrew Feltus, a bond fund manager at Pioneer Investments, said about big banks and securities firms.

Still, in a sign that some investors have not lost all faith, two dozen stocks in the S.& P. 500-stock index rose, albeit barely, and among them were two of the American’s troubled automakers.

General Motors and Ford had a rare positive day on Thursday after Congressional leaders left open the door for federal aid to them and for Chrysler, which is privately held. Still, Democratic leaders criticized the executives of the companies and said they needed to make a more persuasive case that they would be responsible stewards of government money. G.M. and Ford were up slightly, though still close to their lowest levels in decades.

Katich keeps Aussies ahead in low-scoring affair

Thunderstorms on the eve of Australia’s first Test against New Zealand at the Gabba seem to have left severe after-effects with batting orders being blown away during the first two days of play.

The New Zealanders failed to build on their terrific bowling on the opening day when they bowled out Australia for 214, as the hosts replied with a clinical bowling display to skittle out the Kiwis for 156 before tea. The Australian second innings, however, followed a similar trend as they were reduced to 131-6 by stumps on a day where 16 wickets fell.

A first-innings cushion of 58 runs, though, could turn out to be more than handy on a green Gabba surface as the Australians were 189 ahead, with opener Simon Katich unbeaten on 67 while Brad Haddin was on six.

New Zealand, beginning the day with all their wickets intact, were jolted up front when Stuart Clark and Brett Lee made quick inroads to remove openers Aaron Redmond and Jamie How, before Jesse Ryder was sent back by Shane Watson for 30. They went on to lose another wicket before lunch, when Brendon McCullum fell to Mitchell Johnson for eight.

It would have made more sense to take the side as near to the Australian mark if not overhaul it at 73-4, but a spiteful pitch, already proven by the events on the opening morning when Australia were bundled out, gave no signs of wear. Ross Taylor’s entertaining 51-ball 40 was cut short when he was trapped leg before by Brett Lee. The top order had been massacred; of the next six only Grant Elliott, who remained unbeaten on 39, got into double figures as Mitchell Johnson returned to polish off the tail to end with 4 for 30.

The Australian second innings followed a similar script. Matthew Hayden’s appalling series in India seems to be taking its toll on the batsman, although the delivery he got from Chris Martin first up would have set anyone off for the walk. Captain Ricky Ponting wasn’t prepared to play the waiting game, and an unsuccessful pull resulted in his dismissal.

The umpires did their bit to add to the batsmen’s woes on a fiesty pitch, as Michael Hussey was adjudged caught behind. The Aussies also suffered from their impatience as Michael Clarke was run out by a superb Aaron Redmond, on the back of three run outs during Australia’s last Test loss to India at Nagpur.

Opener Simon Katich, however, could end up be the difference between the side’s fortunes. The left-hander displayed outstanding patience and doggedness to be 67 not out. If he stretches his score, Australia would hold all the important going into the third day which might as well prove to be the last.

Tendulkar, Irfan return to ODI squad

New Delhi: Sachin Tendulkar made a comeback in the Indian One-Day squad after eight months for the next two matches against England, it was announced on Thursday in Kanpur. All-rounder Irfan Pathan also earned a recall.

Pacer RP Singh and opener Murali Vijay were dropped from the 15-man squad.

Tendulkar, who recently crossed Brian Lara to become the world’s leading run-getter in Tests, played his last ODI series in Australia earlier this year. The master batsman came in place of surprise inclusion Murali Vijay, who did not get a game in the three matches played so far.

Irfan Pathan was rewarded with a place in the ODI squad for his consistent performance in domestic cricket in the last few months.

The Baroda cricketer played his last ODI game against Sri Lanka in August. Pathan’s inclusion came at the expense of RP Singh who got to play the first two matches mainly because of Ishant Sharma’s injury. But RP was wayward in both games, failing to make an impression on the selectors.

India, who have taken a 3-0 lead in the seven-match series, play the fourth game against England on Sunday in Bangalore.

Squad: MS Dhoni (Captain, Wicketkeeper), Virender Sehwag (Vice-captain), Gautam Gambhir, Sachin Tendulkar, Rohit Sharma, Suresh Raina, Yuvraj Singh, Virat Kohli, Irfan Pathan, Yusuf Pathan, Zaheer Khan, Harbhajan Singh, Ishant Sharma, Munaf Patel, Pragyan Ojha.

India’s tour of Pak seems to be in trouble

New Delhi: The Indian cricket tour of Pakistan in January appears to be in trouble, with the government here being apprehensive on account of security of the team and wondering whether it was worth risking the lives of players like Sachin Tendulkar.

The final decision on the tour, scheduled from January 6 to February 19, will be taken within two weeks on the basis of the assessment by a high-level team of officials that will be going to Pakistan shortly.

Sources on Friday said the risk of undertaking the tour is high considering the prevailing security situation in Pakistan and “no sensible government” would take it.

To press the argument, the sources said if even a “scratch” comes to Sachin, what would happen to the bilateral relations.

“The risk is not worth running,” they said.

The sources cited the recent terror attack on a national sporting event in Peshawar to cite the example of the security situation in Pakistan.

Top cricket nations, including Australia, have refused to tour Pakistan in recent times because of the security situation in the strife-torn country which has not hosted a major international tournament since the Asia Cup in June this year.

The high-profile Champions Trophy, which was originally scheduled to be held in Pakistan in September this year, had to be deferred with most teams refusing to tour the country.

The BCCI has already made it clear to the Pakistan Cricket Board that it would tour Pakistan only if it got the clearance from the government which remained apprehensive despite assurance of a fool-proof security arrangement.

BCCI President Shashank Manohar has told his PCB counterpart Ijaz Butt that he had written to his government for the clearance of the tour and the BCCI is expected to get a reply in the next ten to 12 days.

India is due to tour Pakistan to play three Tests, five One-Day Internationals and a twenty20 game and the itinerary of the tour has been agreed upon by both the Boards.

The government this month stopped the Indian junior hockey team from touring Pakistan for a test series as it was not satisfied with the security arrangements made by the Pakistani authorities.

The PCB has talked about shifting the series to a neutral venue including England or switching the series with India in case the Indian government does not give clearance for the tour.

Chinnaswamy wicket to help batsmen: Curator

Bangalore: The wicket for the fourth One-Day International between India and England to be held at the Chinnaswamy Stadium on Sunday is expected to be a batting paradise.

“There is not much one can say about a One-Day wicket but I can assure you that we have prepared a sportive wicket, which should help batsmen more than the bowlers. The ball will come on to the bat nicely and stroke making will be pretty easy though the first session might help seam bowlers,” pitch curator and former Karnataka Ranji Trophy player Narayan Raju told Cricketnext.com on Friday.

“With most of the tickets being sold even before the deadline, we are expecting a capacity crowd and it will be fitting if the team batting first can put up a big total as they will be entertained thoroughly,” Raju added.

The hosts are already leading the seven-match One-Day series 3-0 and a win in Bangalore will seal the series in their favour.

Meanwhile, the police had to restore to a mild lathi charge to control the over enthusiastic cricket fans, who had assembled in large numbers to buy tickets especially after seeing their team win handsomely at Rajkot, Indore and Kanpur.

Batting maestro Sachin Tendulkar, who missed the first three matches to personal reasons, will be an added attraction for the cricket crazy Bangaloreans.

Bolt: Dog Gone Disney

Walt Disney started out with a mouse, 80 years ago this week, but his company has done all right by dogs too. If Lady and the Tramp and 101 Dalmatians can’t be numbered among the animation studio’s most ambitious projects, they both had a high satisfaction quotient. No wonder: the canine attributes of curiosity, affection and unshakable loyalty are an ideal fit for Disney family values of any era. (Cats, not so much.) From the live-action pup opera Old Yeller in the ’50s, to the mixed-media friskiness of this fall’s Beverly Hills Chihuahua, Disney has paraded and profited from its pooch panache.

Bolt, the first Disney animated feature made under the supervision of Pixar creative boss John Lasseter, has a premise straight out of Chihuahua: an adorable, pampered L.A. dog gets dropped into an alien environment and has to find its way back home, learning lessons of friendship, confidence and self-reliance en route. (It’s also the premise of 140,000 other movies about animals, kids or hobbits.) Bolt fits this familiar mold without looking moldy. Its visual style is unpretentiously attractive, with a limber graphic line, and there’s little showboating in the design or the dialogue. Directors Chris Williams and Byron Howard are perfectly pleased to have labored in the service of that humblest of genres, the dog cartoon. (See TIME’s top 10 dog movies)

The story, though, is high-concept and high-maintenance. In the Bond-worthy opening action scene, Bolt (voiced by John Travolta) is introduced as a Superdog: faster than Speed Racer, more powerful than Benji, able to hold a dangling car between his teeth, plus his gifts of bent-track laser-vision and the amazing thunder bark — all to help his “human,” Penny (Miley Cyrus), escape an army of bad guys. He could be the family dog of the Incredibles. What Bolt doesn’t know, yet, is that all this mayhem and all his powers are fake. He’s the star of a TV adventure series, and if he weren’t so focused on his Penny-paving mission he might notice the cameras, stunt men and effects technicians. Bolt, in other words, is a canine Truman Show, whose producers think he’ll give a more intense performance if he thinks it’s real.

Thanks to conniving from the usual slimy coven of agents and network execs — and a tumble of coincidences nearly as endearing as they are preposterous — Bolt is shipped to New York City, where he strikes up a quick animosity with a sassy cat named Mittens (Curb Your Enthusiasm’s Susie Essman). Their itinerary will be no secret to the youngest of viewers: cat and dog, joined by Rhino (Disney animator Mark Walton), a hamster who travels in a Plexiglas ball. Through Rhino, a diehard fan of the TV show, Bolt realizes that his powers aren’t so super, and he comes to suspect that Penny was just another jaded Hollywood actress who’d forget about him when she left the set.

There are stretches when the animal trio’s westward trek packs no more excitement or amusement than a Presidential candidates slog through the prairie-state primaries. Mittens’ yenta-like attitude can get grating, and for a while Rhino is the only character with much wit or verve.

But from the moment Bolt sticks his head out the window of a speeding truck and feels the breeze of freedom and free will, the picture snaps to life and instantly acquires heart (Lasseter’s favorite movie organ). Of course each character gets to show a heroism all the more special for being displayed without special effects. Indeed, Rhino’s climactic declaration of purpose — that “All my dreaming has prepared me for this moment” — might be the motto, not just of this very satisfying film, but of the Disney-Pixar animators. They’re smart kids who dream for a living.

It’s a satisfaction of another sort to have movies that appeal to the deepest, dreamiest parts of a tyro moviegoer’s soul. In the pre-Thanksgiving lull, parents can take their young’uns to Bolt, drop their 10-to-14-year-olds off at Twilight, and the whole family will have survived the weekend. All it takes is a handsome vampire’s bite and a cute dog’s bark.

Congress Sends Detroit Execs Back — With Homework

Faced with the choice of bailing out the ailing auto industry or letting it fail, Congress picked a brave third option: procrastination.

Considering the mixed messages Capitol Hill sent on Thursday, that seemed the only appropriate approach. First, news spread midday that a group of bipartisan lawmakers had reached an agreement to provide Detroit with an infusion of $25 billion, with a victory press conference to be held at 2:30 p.m. Then, abruptly, House Speaker Nancy Pelosi and Senate majority leader Harry Reid cut the negotiators off at the pass by holding a hastily called press conference of their own in the same Senate room at 2:00 p.m. At that point, the Democratic leaders announced that they would not bring up the agreement for a vote — yet. “What kind of a message do we send to the American people by having a bunch of failed votes here? We do not have the votes,” Reid railed.

From there, Reid and Pelosi detailed a series of hoops they expect the automakers to jump through to qualify for bridge loans from Congress. Ford, General Motors and Chrysler must present business plans to the House and Senate Banking Committees no later than Dec. 2. As part of that presentation, they must prove that, in the long run, they are “viable” companies that not only can repay whatever loans they receive but also can demonstrate that they won’t need to come back and ask for more money. The two committees will hold hearings to vet the plans. If the plans are approved, Reid and Pelosi say they are willing to reconvene both chambers of Congress the week of Dec. 8 to pass a bailout. “Yes, we’re kicking the can down the road, because that will give us the opportunity to do something positive. But that will only happen if they get their act together,” Reid told reporters on Capitol Hill on Thursday. (See the 50 worst cars of all time.)

Kicking the can down the road, however, isn’t the kind of clarity Wall Street is looking for in these dire economic times. Coming a day after the Big Three CEOs’ pleas on Capitol Hill dragged down the markets, Congress’s muddled maneuvers on Thursday only made investors more anxious, pushing the Dow Jones down another 400-plus points and the broader S&P 500 index to an 11-year low.

For weeks now, the auto manufacturers, led by GM, have been warning that they are on the brink of bankruptcy. And they insist that in the current climate, without billions of dollars from Washington, bankruptcy would mean total liquidation, not the restructuring that many experts argue is the only real way to fix the industry. Given the complex, interdependent system of auto-parts suppliers, analysts warn that the loss of one of the Big Three could take down the entire sector — and with it some 2.5 million U.S. jobs — in a cascade effect.

But lawmakers, showing signs of bailout fatigue after the $700 billion financial-crisis package passed in September, have been left largely unimpressed by Detroit’s cries for help. All week long, Senators and Representatives from both parties have lamented the decades of bad management that have put the auto industry in its current predicament: investing in SUVs when the rest of the world, eyeing the future oil crunch, was betting on smaller, more fuel-efficient cars; spending millions lobbying Congress to avoid regulation that would force tougher environmental standards; and giving its union unsustainably generous deals on salary and benefits that hobbled its ability to compete with Japanese and European carmakers. And the answers to these criticisms from the Big Three CEOs at two hearings, one before each chamber, went so badly this week that lawmakers cited their performances as reason not to give them any money.