Citigroup taps Stuckey to help bank get out of subprime pridicament

first_imgNEW YORK – Citigroup Inc., after revealing it may have to write down $8 billion to $11billion of its debt this quarter, named Richard Stuckey to help it untangle the complicated subprime portfolio that may lead to a fourth-quarter loss for the bank. Back in 1998, Stuckey helped Citigroup extricate itself from losing bets on Long Term Capital Management, a Connecticut hedge fund that collapsed. The failure and bailout of LTCM nine years ago is regarded as the last time the global credit markets were as tight as they are this year. Citigroup has direct subprime exposure of $55 billion, $43 billion of which is collateralized debt obligations. CDOs are instruments that bundle different kinds of risk, and some include pieces of bonds backed by mortgages given to subprime borrowers, or those with poor credit history. What has worried investors is not only that Citigroup, the nation’s largest bank, may have to take losses but that those losses could end up being even wider if the credit markets don’t improve. AD Quality Auto 360p 720p 1080p Top articles1/5READ MOREStriving toward a more perfect me: Doug McIntyre Jeffrey Harte, managing director at Sandler O’Neill & Partners LP, lowered his stock price and earnings expectations for Citigroup on Tuesday, noting that he anticipates an additional $4billion loss in 2008 besides the fourth quarter’s potential $11billion loss. In a memo to Citigroup’s global capital markets business Sunday, the company said it was creating a subprime portfolio group to be led by Stuckey. Mark Tsesarsky, another Citigroup veteran, will assist in risk management for the group. The team doesn’t have a plan in motion yet, but over the coming weeks will review Citigroup’s credit businesses. In a call with analysts Monday, Citigroup’s chief financial officer, Gary Crittenden, admitted that the bank did not hedge its bets on subprime debt appropriately before the credit markets froze up over the summer, when worries about spiking subprime-mortgage defaults led investors to avoid the credit markets and banks to slash the value of their CDOs. “There’s no excuses here,” Crittenden said. “It is what it is.” Citigroup, after falling nearly 5percent Monday, fell 82cents, or 2.3percent, to close at $35.08 Tuesday. 160Want local news?Sign up for the Localist and stay informed Something went wrong. Please try again.subscribeCongratulations! You’re all set!last_img read more