Bloggy Business Today

Unlike the big three (General Motors, Chevrolet and Ford), Citigroup was given a financial bailout assistance worth $20 billion as the government lent a helping hand to save the stricken bank from billions of dollars that could have totally been catastrophic. Stocks reacted as well as Dow Jones industrial shot up 300 percent.

And so the proper selection of which companies to help out continues but there is still a lot of work to do as far as strengthening the financial system of the United States is concerned. There are more companies outside the big three automobile manufacturers out there drowning and if the lifesavers are not sent out to pick the proper companies that really need help, chances are this financial bailout strategy is entirely useless and futile.

Stocks may be up today but who knows what tomorrow would bring. We have seen this trend before. Stocks rise after any enticing development comes up. Would this trend continue or follow suit the previous spikes in the endangered trading and finance system of the United States of America.

“With these transactions, the U.S. government is taking the actions necessary to strengthen the financial system and protect U.S. taxpayers and the U.S. economy,” the three agencies said in a joint statement. “We will continue to use all of our resources to preserve the strength of our banking institutions, and promote the process of repair and recovery and to manage risks.”

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[tags]financial_bailout, dow_jones_industrial, automobile_manufacturers, banking_institutions, finance_system, dow_jones, lifesavers, citigroup, general_motors, billions_of_dollars, taxpayers, chevrolet, united_states_of_america, stocks, ford[/tags]

Whenever you happen to be an investor in the business world, one of the worst positions that you can find yourself in is the position where you are actually hoping for a loss. The reason that this is bad should be self-evident, but what is perhaps not as obvious is that the reason you would be hoping for a loss is that the loss you would be hoping for is smaller than losses you had already sustained.

This is what the position of Citigroup investors has been over the last few quarters and the first quarter loss of $5.1 billion that had been reported certainly cheered many of these investors up because of the fact that it was significantly smaller than what most of them had been projecting.

However, there is usually a double edge to news like this and the news is simply that since the losses are still mounting, Citigroup is going to have to look to sales of assets and dividend cuts in order to maintain their own company, keep the head of the corporation above water. This means that many investors might see even more losses in the near future than they have already withstood with Citigroup stock.

To give you an idea of just how bad the situation is, consider the fact that this month Citigroup’s Tier 1 capital ratio was reported as 7.7%; an amount that is lower than it was in February. In addition to that, Citigroup requires a 7.5% ratio in order to maintain its credit rating. Considering nobody seems to know right now just how low that ratio can go, I don’t blame investors for being pessimistic at this stage.