Merrill Lynch, UBS and now Citigroup. Years of lending money without the necessary precaution has lead to this day. The American economy is already in recession though no one wants to spell it out. Will it drag the world economy down or will the Asian dragon (China), Elephant (India) and the tigers (Korea, SE Asia) help to cushion the impact? Well, its going to be a defining year for the world economy for sure.
Citigroup, the nation’s largest bank, reported a staggering fourth-quarter loss of $9.83 billion on Tuesday and issued a sobering forecast that the housing market and the broader economy still had not bottomed out.
To shore up their financial condition, Citigroup and Merrill Lynch, which has also been rocked by the subprime mortgage debacle, both were forced again to go hat in hand for cash infusions from investors in the United States, Asia and the Middle East, for a combined total of nearly $19.1 billion.
Citigroup’s record loss was caused by write-downs from soured mortgage-related securities and reserves for current and future bad loans totaling $23.2 billion. Responding to a string of dismal quarters, the bank said it would also lay off another 4,000 workers, on top of announced reductions of 17,000 employees, and cut its dividend to conserve $4.4 billion cash annually.
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