Are BoA and Citigroup Next to Fall?

Submitted by Melissa Hoffmann on Fri, 02/20/2009 - 12:55

Shares of Bank of America Corp. and Citigroup Inc. plummeted for the sixth straight day on Friday, hammered by increasing fears that the U.S. government could take the control of the banks, wiping out shareholders, according to Reuters.

The banks have reportedly received $90 billion in TARP funds between them but have shown few signs of stabilizing.

Bank of America shares were reportedly down 6.6 percent to $3.66 in premarket trading, their lowest level since 1984, while Citigroup fell 12.3 percent to $2.20, their lowest price since 1991.

All signs that these two banks may suffer a Bear Stearns kind of fate.

In coming weeks, the U.S. Treasury is expected to subject up to 25 banks, with assets exceeding $100 billion each, to "stress tests" to decide which need additional capital.

People close to the situation told the Financial Times that some banks were in talks with regulators over plans that would provide them with another capital injection but stopped short of an outright nationalization. The Treasury expects that the tests will indicate most US banks remain viable today although they could potentially be vulnerable in stress scenarios, the FT reported.

 

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