With the sharp stock-market decline for Citigroup rapidly becoming a full-blown crisis of confidence, the company's executives entered into talks with federal officials on Friday about how to stabilize the struggling financial giant.
NEW YORK — With the sharp stock-market decline for Citigroup rapidly becoming a full-blown crisis of confidence, the company’s executives entered into talks with federal officials on Friday about how to stabilize the struggling financial giant.
In tense meetings and telephone calls, the executives and officials weighed several options, including whether to replace Citigroup’s leadership or sell all or part of the company. Other options discussed included having the government try to steady Citigroup with a public endorsement or a new financial lifeline, people involved in the talks said.
The course of action, however, remained uncertain on Friday night, these people said, and other plans may yet emerge.
But after a year of gaping losses and an accelerating decline in its stock price, Citigroup, which has $2 trillion in assets and operations in scores of countries, is running out of time, analysts said.
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After a board meeting early Friday morning, Citigroup’s management and some board members held several of calls with Treasury Secretary Henry Paulson and with the president of the Federal Reserve Bank of New York, Timothy Geithner, who hours later emerged as President-elect Barack Obama’s choice to become the next Treasury secretary.
As Citigroup’s stock sank, falling 94 cents to $3.77, the Federal Reserve was carefully monitoring how much money corporations and other customers were withdrawing from the bank, people involved in the discussions said. The Fed was trying to ascertain whether the tumult in the stock market could escalate into something worse.
So far, however, these people said, most customers and clients remained committed to Citigroup.
As Citigroup’s fortunes diminished on Friday, the company’s embattled chief executive, Vikram Pandit, went on the offensive. He worked the phones and held a companywide call to shore up the confidence of anxious employees.
Pandit and others have suggested that Citigroup is a victim of short sellers, which some have blamed for the speeding the demise of other financial companies this year.
“The game essentially is this: We made a lot of money on Bear Stearns, we parlayed that to make more money on Fannie and Freddie, now we made even more money and now we’ve got to go after bigger and bigger companies,” Richard X. Bove, an analyst at Ladenburg Thalmann, predicted in September. He said Citigroup had enough capital to withstand such pressure.