The expression what doesn’t kill you, makes you stronger might not apply to this Street survivor. That's because Citigroup once the symbol of unfettered capitalism - is now the face of a government bailout.
The victim of a credit crisis that claimed the career of former CEO Chuck Prince, Citi suffered tens of billions in losses and flirted with death when its share price fell to under a buck.
But the emergency team rushed to the scene and Citi was put on life support by the government in the form of a TARP bailout. As a result Uncle Sam now owns 1/3 of outstanding shares – an arrangement that may be keeping investors at bay.
The widely followed analyst Dick Bove is among them. “The overhang placed on the market is going to force most of the buyers away until there’s some resolution,” Bove says.
Now, current CEO Vikram Pandit faces mission impossible: to revive this once proud institution, he needs to make Citi a leaner, meaner machine.
But does Pandit have enough time to perform? Or has the government already started to lose patience?
I don’t think Pandit is going anywhere anytime soon, speculates Charlie Gasparino. Citi has stabilized and the government is saying, who else are they going to get? So at least for this year Pandit looks safe.
But for the long-term all bets are off, adds Gasparino. And it probably all boils down to the recovery. If the economy comes back Citi and other banks will stabilize. But if there’s another downturn, mortgages could blow-up and that’s a problem for Citi as well as everyone else!
See our entire interview with Charlie Gasparino. Watch the video now!