As Markets Gyrate, Citigroup Ponders Fate

Citigroup executives are currently meeting in something of an emergency session to figure out what to do in the face of flagging investor confidence in the banking behemoth. Or are they? They’re meeting, at least, but the company says that it’s financially strong, despite its four quarters of losses stemming from billions in writedowns. Prince Walid bin Talal of Saudi Arabia seems persuaded of Citi’s long-term prospects, having raised his stake in the bank to 5 percent. But other investors aren’t so sure. After an upward spike this morning, Citi share prices were down about 16 percent by mid-day. Of course, bouncing around like a rubble ball is the new normal for Wall Street. This morning the Dow Jones index started up, but then started an up-and-down pattern until mid-day, when it was up slightly. The S&P 500 and Nasdaq likewise gyrated but ended up roughly where they started. Treasury yields for two-, 10-, and 30-year government bonds bounced back a little this morning after yesterday reaching their lowest levels since the Fed started keeping track in 1962. Low yields are generally regarded as indicators of a weak credit market, as investors turn to Treasuries instead of making loans. In an unusual move, the U.S. Treasury Department has said that it will help liquidate one of Reserve Management Corp.’s money-market funds, the Reserve U.S. Government Fund. The fund invests in securities issued by governmental agencies or quasi-governmental entities, such as Fannie Mae, and Treasury will function as buyer of last resort for the fund, which has been trying to liquidate its assets since the onset of the financial panic. Under the agreement between Reserve Management Corp. and Treasury, the fund will continue its efforts to liquidate assets until Jan. 3, after which the department will buy at par any remaining securities. Freddie Mac has been warned that it might be kicked off the New York Stock Exchange because its share price has been in the penny-stock range–less than $1 a share–for more than 30 days. The company has six months to get its stock above the $1 mark, or face delisting. The stock’s 12-month high was last December, at $37.18 a share, and it’s been mostly downhill since then.