In recent weeks investment banks such as Citigroup, JP Morgan, and Merrill Lynch have announced massive write-offs with respect to their exposure to their sub-prime loan investments. Citigroup is going to write down $18.1 billion and has cut their dividend by 41%. If I was an investor in Citi, I would be furious and calling for the CEO’s head on a stick. It is bad enough they are paid exorbitant salaries, but the fact that heads haven’t started to role is a shame. Well I guess if the CEOs are not losing their jobs, it is made up for by the fact that Citigroup is going to fire 4,200 of their employees.
What have these banks done in order to cover these losses? They have now put their hands out to foreign investors to buoy them. At least these foreign firms still see value in investing in the American economy, even when the President and the Federal Reserve are considering a massive stimulus package to avoid a Recession. There are other international side effects, the Australian market has taken a heavy hit, and that probably will not be the last.
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