Citigroup and the Government to Put Limit in Losses in the Forex Market

Citigroup and the Government to Put Limit in Losses in the Forex Market

The rumors have been going on: Citigroup, one of the largest financial services companies in the world, is currently thinking of cutting back jobs, which means that there will be thousands of employees all over the world who will be losing their jobs before Christmas.

It is definitely such a huge threat, and for that, the government is thinking of helping the company to make sure that they can limit their losses in the forex market. Because the currency rates are falling, they have already garnered toxic assets. So far, the company has already garnered over $100 billion of it, after their shares have already lowered down and they eventually lost. This, in turn, definitely hurt the company, thereby forcing them to think of reducing the costs extensively.

As of the moment, the Treasury Department and the Federal Reserve are already in the talks with the Citigroup. There are also several U.S. regulators that have joined in the discussion. They have been in meeting during the entire weekend, and the results may be released this week, probably on Monday. Nevertheless, other pertinent details such as those who are really involved in the talks and issues that may have been reached are not known since they are left confidential. But to get an overview, the plan is to actually make sure that the assets of Citigroup will remain in the company and that the government will assume the losses, but only a portion of it.

Where It All Started

Citigroup suffered one of the greatest losses they ever have all throughout their lifetime: 60 percent of their market value. The sharp decline, which happened just last week, may be caused by the loss of investor confidence after the company continued to obtain losses rather than gains for four successive quarters. If the bank and the government will not do something about it and the value of the company will continue to slide down, there’s a huge possibility that this will be a major threat not only to their clients but to their employees as well. This will then pose a big problem in the operations of the bank.

The Benefit of the Plan

One of the foremost benefits of the rescue plan is to provide a good breathing room for the company. This will help calm down the nerves of investors, clients, and customers, most especially when they know that the company is getting support from the government. However, the plan may not be long-term, and the Citigroup should be more than prepared for the long days ahead. As mentioned, the government doesn’t absorb only a portion of the losses. Citigroup therefore must find ways on how to soften the impact of the remaining balance.

In the meantime, the company is doing its best to lift their image despite the financial turmoil. In a recent statement they released, they assured the public that they have excellent liquidity and very strong capital. The chief executive officer of the company, Vikram Pandit, already informed their employees that they will not be breaking the company and that there will be no brokerage unit that will be sold.