CitiZombieBank

A little post-Haloween followup. I now get why Citi has jacked up rates to 29.99% on their customers (including me). This New York Times article describes the company as "desparate for capital", and paints the picture clearly:

While Citigroup has written down tens of billions of dollars’ worth of mortgages on its books, there are looming problems in its huge credit card portfolio. Of the company’s $1.2 trillion in credit commitments outstanding in the second quarter, $873 billion were credit card lines. A measure of the bank’s efforts to wrestle that problem to the ground is the interest it charges customers: in October, Citigroup raised interest rates on some credit card holders to 29.99 percent.

Chris Whalen, editor of the Institutional Risk Analyst, calls Citigroup “the queen of the zombie dance,” referring to the group of financial institutions that the government has on life support.

They are hoping that a combination of bank assistance and maximizing revenue and buying time will let them survive,” he said. “When I look at the whole picture, Citigroup is in the process of resolution. I continue to believe the equity is worth zero and that the company will have to go to bondholders for some kind of money to make the bank stable.”

This shows that the government has stabilized the financial system for now, but it's still very fragile. Is a second bailout around the corner?