Citigroup faces a write-down in the range of $6 billion to $10 billion, mainly because of exposure to subprime mortgages and collateralized debt obligations, CNBC has learned.
Citi Chief Executive Officer Charles Prince has already offered to resign from his post, according to a person familiar with the situation, and the financial services company's board is expected to accept his resignation at an emergency meeting scheduled for Sunday.
The size of Citi's write-off is still being debated, though a source told CNBC that Citi's board is pressing company finance executives to clarify the issue. The firm's audit committee is also scheduled to meet Sunday, in advance of the emergency board meeting.
On Thursday, November 1, the Dow dropped more than 360 points. One of the prime factors for this big drop was Citygroup's weak earnings report, which stated that the bank wrote down $5.9 billion in assets in the third quarter, and that this write-down was the result of "losses stemming from mortgage-backed securities and bad bets on asset backed commercial paper." What is important about this CNBC story is that Citigroup's losses may be greater than the $5.9 billion that the bank originally reported. In other words, Citigroup doesn't yet know how much the bank has lost due to the bad investments in the mortgage-backed securities. It is no wonder that Citigroup's CEO Charles Prince is resigning. Of course, Prince will be walking away from Citigroup wearing a golden parachute.
No comments:
Post a Comment