Friday, June 27, 2008

Stopping A Bank Run 

This is a modern version of sparking a bank run. The question for Citigroup is how to stop it. The bank no longer has the credibility to argue with the Street. There is little it can do in the way of PR because it has stumbled for months. With its stock beaten down, it is a target for takeover.

Bank runs are ugly affairs. We've seen two so far this year at Bear Stearns and at Lehman. There is a brilliant cinematic version of an old-fashioned run in this film. Today, institutional investors simply pull their billions and a bank no longer has the capital it needs to operate.

In the financial services industry, credibility is everything. It is clear that Citigroup no longer has it and the CEO must be having sleepless nights.


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