NEW YORK (AP) — Citigroup Inc. shareholders may have finally gotten what they wanted — the resignation of Chairman and Chief Executive Charles Prince — but Wall Street’s worries are far from over.
At an emergency meeting of the Citi board Sunday, the nation’s largest bank announced Prince’s widely expected departure, but also estimated it would take additional losses of $8 billion to $11 billion. In the third quarter, it already took a hit of $6.5 billion in asset mark-downs and other credit-related losses.
Meanwhile, the company remains entrenched in a mire of off-the-books investment vehicles funded by risky debt. Citigroup may need to take the fall for them if they fail.
And Citigroup’s not alone in its debt problems. When borrowers with poor credit stopped paying their mortgages, many banks not only had to take losses on those subprime mortgages, they also saw instruments in their portfolios backed by mortgages plummet in value. No one knows how much longer home prices will keep slumping, and whether problems related to the housing market will start affecting other types of consumer debt.
Also to be seen is how much longer the credit markets will stay tight, and if the currently strong portions of the economy will be hampered by banks’ inability to make loans.
By Madlen Read, AP Business Writer
Source: Yahoo! Finance
