CITI never sleeps (and how!)

A fresh panic embroiling Citigroup reached a fever pitch on Friday as the stock dropped below $4 on heavy volume. It is now worth $20bn down from $250 bn a year ago. The unraveling spread across the market renewing concerns about the financial crisis.

A solution seems likely to be brokered before markets open Monday or all hell will break-loose, the only unknown is what it will look like.

Ben Stein1 has written some thoughts on what the future now holds, and I think he has it spot-on (refer to my comments here about the Paulson flip-flop and here about the effects of debt-deflation in this recovery) - indeed "this time its different" may not be overstepping the truth. He believes that at this precarious point, letting the Big3 go bankrupt would send the wrong signal and fear would be unleashed making a recovery even more long and painful. I heard basically the same idea on Friday from a few oil market pundits. The feeling is that without a Big3 bail-out WTI will see $30 before it stops, otherwise $40-50 should be it. There is a small amount of sense in this argument but that maybe all it takes.

Footnotes:
1) For those who don't know, I am a big fan of Ben Stein who despite being a Democrat has called alot of Henry Paulson's antics for what they really are - panic attacks! Ben's father was Herbert Stein PhD - Chair of the Council of Economic Advisers from 1972-74 under Nixon and Ford.