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Have We Seen the Worst of the Financial Industry's Problems?
Another week, another bank bailout. The most recent recipient of government aid is Citigroup, and the government's bailout package includes a $20 billion investment in the company and a $306 billion guarantee of risky assets.
Monday's market close was met with cheers as investor enthusiasm sent the market soaring, reflecting a general investor bet that the worst of the financial industry's problems may be over.
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Citigroup Surrenders to Wells Fargo in Wachovia Battle
Citigroup waved a white flag late Thursday as it bowed out of the battle with Wells Fargo over which bank would buy ailing Wachovia. Early last week, Wells Fargo had backed out of talks as the federal government brokered a deal that arranged for Citigroup to pay $2.2 billion for Wachovia’s banking operations and $12 billion in stock to the FDIC. Later in the week, after the deal with Citi had been agreed upon, Wells Fargo came back and offered $15 billion in stock to buy all of Wachovia.
How Your Zero-Balance Credit Card Could Cost You
Think you’re avoiding extra fees by being savvy and paying off your credit cards in full every month? Maybe not any more. Some companies, including Bank of America and Citigroup, may start charging credit card holders for not using their cards enough.
The Customer Service Halls of Shame and Fame
Nobody wants a customer service experience that leaves you swearing under your breath, but these situations aren't exactly avoidable. MSN Money knows how important customer service is to consumers and conducts an annual survey that measures customer satisfaction.
It's named 10 companies that need a lot of improvement in the customer service department and 10 that would be good examples to the companies in the Hall of Shame.
Banks Play Tug-of-War Over Wachovia
Scooping up troubled banks is the new thing to do for financial institutions that have managed to keep themselves above water, and things are getting competitive out there. Failing Wachovia was the apple of Citigroup's eye until Wells Fargo tried to swoop on its courting efforts. The game of tug-of-war is an important one, as banks compete to see who will survive the economic crisis and come out in a stronger position than when it started.
CEOs on the Spot For Mortgage Crisis
An overstated gap between the rich and poor is nothing new in this country, but some of the guys on the high end of the spectrum have been putting in some time in the courtroom instead of in the office. The CEO of Countrywide and former CEOs of Merrill Lynch and Citigroup — three of the biggest banks involved with the subprime mortgage crisis — testified in front of the House Committee on Oversight and Government Reform. According to ABC News, these three CEOs received over $460 million in compensation in just five years, while in the second half of 2007 Countrywide lost $1.6 billion, Merrill Lynch lost $10.3 billion, and Citigroup lost $9.8 billion.
A Look Ahead: Shallower Bank Bonus Pools
Wall Streeters used to the unfathomably generous bonuses of years past will likely be facing lighter stockings (OK, direct deposits) this year. Goldman Sachs and Morgan Stanley employees are now employed by bank holding companies with payment structures closer to traditional commercial banks rather than investment banks, meaning Goldman's 2007 $12.1 billion bonus pool will be shallower in 2008.
The bonuses may be scaled down from past years, but employees will still receive bonuses bigger than what most of us outside the financial world will ever see.
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