Handling the Bank Bailouts
Photo by: epicharmus
As of this writing, the Citibank closed the previous day’s trading at $1.20 per share. This gives them a market capitalization of just over $6 billion dollars. Specifically, this means all the common stock of Citibank is worth $6 billion dollars. In November, the US Government “injected” $20 billion and guaranteed $306 billion of Citibank’s assets. Citibank has been “bailed out” repeatedly and has had a total of $45 billion of taxpayer money channeled to it.1 This leads to one simple question:
How is Citibank Solvent?
Of course the answer is, it isn’t. But that leads to the question: how is its common stock still worth $6 billion?
Currently the governmnet is propping up a company to retain value for investors who should have been wiped out already. Sure they have been diluted by government injections, but that seems a poor punishment for investing in an utterly insolvent company.