Changes

Citigroup, the third largest bank in the U.S., is tottering in late November despite its receipt of $25 billion in TARP bailout money. Its value on the stock market has plunged to $21 billion, down from $244 billion two years ago.  Round after round of layoffs have ended 75,000 jobs in 2008 out of 375,000 employees a year ago.  Very heavy exposure to toxic mortgages is the main culprit.   

Citigroup, the third largest bank in the U.S., is tottering in late November despite its receipt of $25 billion in TARP bailout money. Its value on the stock market has plunged to $21 billion, down from $244 billion two years ago.  Round after round of layoffs have ended 75,000 jobs in 2008 out of 375,000 employees a year ago.  Very heavy exposure to toxic mortgages is the main culprit.   

At all times Citigroup used elaborate mathematical risk models that looked at mortgages in particular geographical areas, but never included the possibility of a national housing downturn, or the prospect that millions of mortgage holders would default on their mortgages. The prevailing approach at Citigroup and the other big banks was to make money as fast as possible (generating annual bonuses of $10 to $30 million for senior executives), which assigning zero to the risk of a systemwide downturn. Such a downturn came with disastrous consequences for Citigroup and its rivals on Wall Street.  Even after Bear Stearns ran into serious trouble in summer 2007, Citigroup decided the possibility of trouble with its CDO’s was so tiny (less than 1/100 of 1%) that they excluded them from their risk analysis.  Citigroup still holds $20 billion of mortgage-linked securities, most of which have been marked down to between 21 cents and 41 cents on the dollar. It has billions of dollars of giant buyout and corporate loans. And it also faces a potential massive losses on auto, mortgage and credit card loans as the economy worsens.</ref>Eric Dash and Julie Creswell, "Citigroup Pays for a Rush to Risk," [http://www.nytimes.com/2008/11/23/business/23citi.html?ref=business&pagewanted=all ''New York'' Times,’’ Nov. 22, 2008]</ref>

At all times Citigroup used elaborate mathematical risk models that looked at mortgages in particular geographical areas, but never included the possibility of a national housing downturn, or the prospect that millions of mortgage holders would default on their mortgages. The prevailing approach at Citigroup and the other big banks was to make money as fast as possible (generating annual bonuses of $10 to $30 million for senior executives), which assigning zero to the risk of a systemwide downturn. Such a downturn came with disastrous consequences for Citigroup and its rivals on Wall Street.  Even after Bear Stearns ran into serious trouble in summer 2007, Citigroup decided the possibility of trouble with its CDO’s was so tiny (less than 1/100 of 1%) that they excluded them from their risk analysis.  Citigroup still holds $20 billion of mortgage-linked securities, most of which have been marked down to between 21 cents and 41 cents on the dollar. It has billions of dollars of giant buyout and corporate loans. And it also faces a potential massive losses on auto, mortgage and credit card loans as the economy worsens.<ref>Eric Dash and Julie Creswell, "Citigroup Pays for a Rush to Risk," [http://www.nytimes.com/2008/11/23/business/23citi.html?ref=business&pagewanted=all ''New York'' Times,’’ Nov. 22, 2008]</ref>

==Crisis in Auto industry==

==Crisis in Auto industry==