A government official briefing reporters defended the Citigoup deal as necessary to reassure Citi investors that the risk associated with the company's balance sheet have been reduced.
The bank's stock has dropped every day for two weeks, losing 55% in the past three days and 88% in the past 12 months, to close Friday at a 16-year low of $3.77 a share.
"Citi is in miserable shape, and additional support is critical," says Sean Egan,. managing director of ratings agency Egan-Jones..
Yet, Citigroup, one of the world's largest banks, has $2 trillion in assets and $800 billion in deposits from 109 countries.
The company has made repeated efforts to restore confidence. Pandit met with employees on Friday to dismiss rumors that the bank will be forced to sell some units, including the Smith Barney brokerage. On Thursday, Citigroup said it "has a very strong capital and liquidity position." That same day, Prince Alwaleed Bin Talal Bin Abdulaziz al-Saud of Saudi Arabia said he was increasing his stake in Citigroup from 4% to 5%.
All these actions failed to calm investors who have already seen two once-pre-eminent Wall Street firms fail.
"Executives at Bear and Lehman were all saying, 'We're strong,' and look where they are," says Anton Schutz, portfolio manager at the Burnham Financial Funds, a Citigroup shareholder.
After meeting with employees on Friday, Pandit met with Citigroup's board of directors to discuss options to halt the slide in the share price.
There's been a steady stream of news to fuel the concerns. Last Monday, Pandit said he was slashing 52,000 jobs, the largest single job cut from any industry in 15 years. On Wednesday, investors were spooked by news that Citigroup will buy the last $17.4 billion of its derivative assets that are held in off-balance-sheet entities, with already eroded values. The fear: Further damage from the derivatives portfolio put Citigroup in a more precarious position. Citigroup also lost out to rival Wells Fargo on its planned acquisition of Wachovia.
It's been less than 12 months since Pandit became CEO. "I think he's been a dealt a terrible hand, and he has few cards left," says Matt McCormick at Bahl & Gaynor Investment Counsel.