Tuesday, November 27, 2007

Citi Gets a Bailout

Wall Street rebounded today on news that Abu Dhabi bailed out Citi to the tune of $7.5 billion. The news was viewed as relief from the continual negative disclosures coming out of the financial sector.

The deal actually underlines the severity of the crisis facing the banks. Without this infusion, Citi would be in a situation where it would probably be forced to merge with investors (including many in the Middle East) receiving pennies on the dollar. The situation still is not attractive for Citi; the bank still does not have a CEO and will shortly be laying off 45,000 employees. A good portion of assets are still impaired and need to be written down.

The upside is that the bank managed to swing this deal despite the dismal environment. It brought hope that Sovereign wealth funds may rescue other large financial institutions.

Citigroup Sells Abu Dhabi Fund $7.5 Billion Stake

Citigroup Plans New Round Of 'Massive' Job Cuts

Stocks Higher After Citi Secures Capital