So much for TARP and the bailout, said the market yesterday. Citigroup has gotten $25 billion in capital from the government, and has raised $75 billion in capital overall. Nonetheless, its stock has fallen 33% this week to as the shorts and credit default swap markets execute what appears to some to be a replay of Bear Stearns. Some respected analysts see its biggest losses still ahead. Reuters:

Citigroup Inc faced a crisis of confidence on Wednesday as investors questioned the survival prospects of the U.S. banking giant, and its shares tumbled 23 percent to a 13-year low. The second-largest U.S. bank by assets has been reeling on concerns that mounting losses from credit cards, mortgages and toxic debt could overwhelm its efforts…Citigroup shares closed down $1.96 at $6.40 on the New York Stock Exchange and have fallen 33 percent this week…Wednesday’s decline drove Citigroup’s market value down to about $34.9 billion…

Worries about Citigroup were a key factor in U.S. stocks falling broadly Wednesday to a 5-1/2-year low. “The whole thing echoes quite frankly of Bear Stearns,” said David Dietze, chief investment officer of Point View Financial Services in Summit, New Jersey…

William Smith, a portfolio manager at Smith Asset Management, referred to insurer American International Group Inc, which got a $152 billion government bailout. “It’s simple. Break it up before it turns into another AIG,” he said…

“If the government stepped in, they would rescue the senior bondholders and probably the subordinated holders too, but equity is far less likely to be saved,” said Sean Egan, principal of Egan-Jones Ratings Co…

“The financial industry is under assault,” said Tom Sowanick, chief investment officer for Clearbrook Financial LLC in Princeton, New Jersey. “It looks like the short-sellers are squeezing the hell out of Citi shares”…The cost to insure $10 million of Citigroup debt against default for five years rose to $360,000 annually from $240,000 on Tuesday…

Citigroup’s market value is down from more than $270 billion just two years ago. It is also less than one-half the $75 billion of new capital that Citigroup has raised since the credit crisis began, including $25 billion through Treasury Secretary Henry Paulson’s financial industry rescue package.

So does all this mean that Citigroup has to be bailed out from the bailout by a new bailout? Some analysts see a need for up to an additional $1.2 trillion in capital, and say that TARP was not the answer. Reuters: “Debt or TARP capital is not true capital. Long-term debt financing is not the solution. Only injections of true tangible common equity will solve the current crisis”. How can this be? We were told that the $700 billion bailout was the answer. Can the bailout need a new bailout so soon?

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