In Washington, Citigroup officials this week have been urging lawmakers and regulators to intervene by making it tougher for investors to place bets that the company’s share price will fall, a strategy known as “short selling”, according to people familiar with the matter.
The firm, along with representatives of other banks, is lobbying the Securities and Exchange Commission (SEC) to reinstate the ban it temporarily imposed this autumn on short selling of financial stocks, the people said.
SEC chairman Christopher Cox said he would hold a teleconference with international regulators on Monday to discuss short selling and other matters. In a statement, he said it was essential that “there be close coordination among international markets to avoid regulatory gaps and unintended consequences”.
Meanwhile, Citigroup executives and directors are rushing to bolster the confidence of investors, clients and employees. Members of the board are hoping that Citigroup can weather the storm by becoming more transparent with investors and easing anxiety that tens of billions of dollars in risky assets are lurking on the company’s books.
On Wednesday, in one move aimed at quelling the uncertainty about Citigroup’s exposure to risk, the company said it would buy $17.4 billion in assets from its structured investment vehicles complex investment tools that first encountered trouble last year due to their mortgage related holdings. Executives have been telling traders, brokers and other employees to reach out to clients and tick off a list of factors that showcase Citigroup’s strength. On Thursday, for instance, executives in the wealth management unit arranged a Friday afternoon conference call for clients. A brochure that brokers were asked to share with clients promises that the call “will help you to better understand the current financial crisis”.
The sell-off in Citigroup shares has led executives to start laying out possible contingency plans. In addition to pondering a move to sell the entire company to another bank, executives have started exploring the possibility of selling off parts of the firm, including the Smith Barney retail brokerage, the global credit card division and the transaction services unit, the people said. Pandit is loath to pursue such an approach, they added. Thursday’s stock slide came despite the announcement by Saudi Arabian investor Prince Alwaleed bin Talal bin Abdulaziz Al Saud that he will increase his holdings in Citigroup Inc. to 5%, adding that he supports the banking giant’s management. “Prince Alwaleed began buying Citi shares as he strongly believes that they are dramatically undervalued,” according to an emailed statement from his office. His holdings are less than 4%, according to the statement.
In late September, hoping to deepen its pool of deposits and shed some risky assets, Citigroup agreed to buy Wachovia Corp. with backing from the US government. But before the two banks could hammer out a formal merger document, Wells Fargo and Co. swooped in with a higher bid, stunning Citigroup executives.