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Citigroup collapse would reach far

Like many in the bay area, Bob DiLonardo has ties to Citigroup. It's hard not to considering the behemoth's tentacles run deep and wide — credit cards, mortgages, brokerage services, corporate lending, wealth management through Smith Barney.

But DiLonardo, a retail services consultant in St. Petersburg with auto insurance through Citi subsidiary Travelers, is no fan of a bailout. (Editor's note: See correction below.)

" 'Too big to fail' doesn't ring very true to me," he said Monday. "In my opinion, all we'll be doing is putting problems forward into the future rather than solving them. I'm going to take pain one way or another."

Fearful that a collapse of Citi could trigger a broader fiscal crisis, government regulators unveiled plans over the weekend to inject $20-billion more into the company on top of $25-billion already tapped through the federal rescue plan. The deal also puts taxpayers on the hook to guarantee $306-billion in risky Citigroup assets.

While many like DiLonardo wondered why the government insists on bailing out financial services companies, Wall Street readily embraced the move on Monday. The Dow Jones Industrial Average rocketed up nearly 400 points, ignoring another round of gloomy housing sales data. Citi's stock, which had plummeted 60 percent last week, rebounded with a 58 percent gain to close at $5.95 a share.

Some observers saw the intervention as a new model for how the government might carry out other bank stabilizations.

"This could be the template for saving the banks," said Scott Bleier, founder of market advisory service CreateCapital.com. "The government has taken a new quill out, they've gone to where they didn't go before in terms of trying to secure the system."

With its wide array of financial products, Citigroup boasts $2-trillion in assets, $800-billion in deposits and 200-million customers in more than 100 countries. As local bank analyst Richard Bove put it three months ago during the early stages of the banking crisis: "The 6,000 banks at the bottom of the industry don't have enough assets all together to equal one Citibank."

That financial depth helped place Citi in the epicenter of the mortgage bust and high on the government's "must not fail" list. In the past two years, Citi and its affiliates have been part of more than 1,500 foreclosure cases filed in Pinellas County alone.

In Florida, Citi employs about 12,000 people, including 3,200 throughout the bay area, ranging from Smith Barney and CitiFinancial branch offices to a financial services campus in New Tampa.

A week ago, Citi confirmed it was cutting 53,000 jobs globally, reportedly the largest single job cut from any industry in 15 years. Employees in the bay area are waiting to hear the regional breakdown.

Economic development leaders have viewed Citi's Tampa operation as one of the linchpins of a financial services cluster, along with such entities as Depository Trust & Clearing Corp. and JPMorgan Chase.

Beyond any looming Citi cutbacks, JPMorgan Chase is in the middle of cutting more than 450 jobs out of its Tampa Bay workforce by the end of 2009. Nevertheless, Larry Richey, past chairman of the Greater Tampa Chamber of Commerce's Committee of 100, believes the area's financial services cluster remains solid.

As financial companies rebound, he said, the bay area is poised to capitalize, ironically because of the housing bust.

"What happened to us between 2002 and 2007 is that housing costs got out of line. That's pretty much rectified itself," Richey said. "Financial services firms continue to look at Tampa today as a viable expansion and relocation market."

Citi was on the cusp of becoming Florida's largest bank this fall until Wells Fargo torpedoed its plan to buy the ailing Wachovia Corp.

That failed deal helped exacerbate Citi's current plight. Citi was counting on Wachovia's rich consumer banking deposits, particularly in Florida, to help shore up its reserves during the credit crunch.

The issue of a Citi bailout has polarized Washington.

One side has been characterized by supporters such as Sen. Charles Schumer, D-N.Y., who warned that if Citi fails, "millions of innocent people are hurt, and the economy suffers at a time when it's terribly, terribly fragile."

The other side is led by free-market advocates like Sen. Richard Shelby, R-Ala., who contend government intervention is wrong, and "Citi has got to save itself" even if it is taken over by somebody else.

Jim Baird, chief investment strategist with Plante Moran Financial Advisors, said Wall Street was calmed by the decision to help prop up Citi, but he predicted that the markets' initial enthusiasm could give way to further questions about the effectiveness of the government's scattered efforts to sew up problems.

"I think, at a minimum, what you're seeing today is some relief that, first of all, they're stepping in to do something," he said. "There's still more questions than answers surrounding whether what's been done is going be enough."

Times wires and Times researcher Will Gorham contributed to this report. Jeff Harrington can be reached at harrington@sptimes.com or (727) 893-8242.

CORRECTION: Travelers Insurance is no longer a subsidiary of Citigroup. A story Tuesday about the bailout of the financial company was incorrect on this point.

Lending

As of September, Citigroup's Florida operation included 106 CitiFinancial offices, including 20 in Hillsborough and Pinellas counties, which make personal and home loans. It also had an office in downtown Tampa devoted to municipal and public finance. In the past two years, Citibank and its affiliates have been part of more than 1,500 foreclosure cases filed in Pinellas County alone.

Banking

Although Citigroup employs about 12,000 people in Florida and 3,200 in the Tampa Bay area, it has a relatively small banking presence, with $8-billion in deposits. Wachovia, the largest banker in Florida, has 10 times as much. Citigroup attempted to buy Wachovia in September but was trumped by Wells Fargo.

Credit cards

Citigroup's credit card line includes cards with bonuses for travel, cash back and gasoline, plus cards geared toward college students and small businesses. In April, Citi sold its Diners Club Network card to Discover.

Investing and
wealth management

Citigroup owns several financial advisers that help lenders and businesses manage IRAs, 401(k)s and stock investments including Smith Barney, Primerica, and Women & Co., a service catering to women.

Times staff

Citigroup collapse would reach far 11/24/08 [Last modified: Friday, January 16, 2009 10:34am]

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