Citigroup Customers Get Hit With Their Own Cash Crunch - Citibank Limits ATM Cash

Citigroup Customers Get Hit With Their Own Cash Crunch

online.wsj.com

Citigroup Inc. is one of the biggest victims of the credit crunch caused by the subprime-mortgage crisis. Some of its customers are suffering from a credit crunch of their own.

In the days leading up to Christmas, just when cash for gifts, tips and entertainment is essential, Citigroup cut the daily amount of money some customers could withdraw from its automated teller machines to about $500.

Citigroup wasn't trying to preserve cash to bolster its own balance sheet ...

(visit the link for the full news article)


Related News Links:
Abu Dhabi to Bolster Citigroup With $7.5 Billion Capital Infusion

Related AboveTopSecret.com Discussion Threads:
Citibank to hold emergency meetings

[edit on 1/5/2008 by Gools]

Here is another source for the same story:



Citigroup is in major financial trouble, as any cursory web search of business news will attest.

Don't forget that Citi is the bank that got a $7.5 Billion loan in exchange for a (rumoured?) 11% interest rate and a chunk of the company! That's how desperate they were to get their hands on some cash.

I can't help but think that rather than any kind of "security measure" to combat "cash machine fraud" this is a prelude to a possible run on the bank. This is a "pre-emptive" move on their part IMO to limit cash outlays despite the fact that the WSJ article says it's not so in the free snippet (the rest of the article is for subscribers only unfortunately).

It has been rumoured for a couple of months that several major US banks are in deep financial trouble. Deeper than we have been led to believe to this point.

This kind of development is a harbinger of bad things to come IMO.
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online.wsj.com
(visit the link for the full news article)

[edit on 1/5/2008 by Gools]

Originally posted by Gools
Don't forget that Citi is the bank that got a $7.5 Billion loan in exchange for a (rumoured?) 11% interest rate and a chunk of the company! That's how desperate they were to get their hands on some cash.

This kind of development is a harbinger of bad things to come IMO.
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I believe the Saudis got 11% of Citibank for 7.5 Billion, which would make one of the largest banks in the US worth less than 700 billion. Don't forget, that's assets AND the value of it's customer base and market share. I believe Google and Youtube are worth more than that.

Wait.. that's 70 Billion!!! Holey cow, it's worse than I thought!

Originally posted by Gools
It has been rumoured for a couple of months that several major US banks are in deep financial trouble. Deeper than we have been led to believe to this point.

One to watch out for is Bank of America. Whispers are not good. This article is from October;

Shake-up at Bank of America symptomatic of many problems

NEW YORK: Bank of America's investment bank has lobbied hard to win Wall Street's respect. Now, it is lowering its head in retreat.

Bank of America announced a shake-up of its investment bank Wednesday night, cutting 3,000 jobs and installing Brian Moynihan as its fourth leader in less than seven years.

The announcement followed a third quarter in which the investment banking unit's profit dropped 93 percent after virtually every area performed poorly amid the credit market turmoil.

[edit on 5-1-2008 by infinite]

Wow, Citibank is lucky they didn't trigger a run on the bank from this.

Enough people worried over the bank restricting how much of their money they can have could have caused a widespread panic, with people bleeding their accounts dry at the ATM's.

It would only be a matter of time before there simply isn't enough cash for the rest of the customers, then begins the REAL problem.

Originally posted by johnsky
Wow, Citibank is lucky they didn't trigger a run on the bank from this.

It's likely it could happen and I wouldn't be surprised if it did.
The Western finance system will see another Northern Rock and another run, UK financial media has been reporting others are heading that way.

[edit on 5-1-2008 by infinite]

This is not good people!!!

I've been looking into some news articles from the Abu Dhabi Citigroup deal last month and things are not looking good!

Citigroup sells stake to Abu Dhabi for $7.5bn

The bank, which is nursing sub-prime write-downs of up to $16.9bn, will initially sell equity units to the ADIA, which will eventually be convertible to no more than 4.9pc of Citigroup's shares.

Until conversion, each unit will pay a fixed rate of 11pc, payable on a quarterly basis.

That's a LOAN of money in exchange for equity units paying 11% percent interest for a period of 2-3 years (specified as maturing between March 2010 and September 2011 in an article below) after which conversion gives them only 4.9% of the shares in the company.

The fact that Citi had to agree to 11% percent interest for several years (!!Helo?!!) at a time when central banks are cutting rates demonstrates just how desperate Citi was to get their hands on the money.

And it's not enough!

From the same story:

The sale of the stake to the ADIA comes just weeks after CIBC World Markets analyst Meredith Whitney warned that Citigroup needed $30bn more to meet its capital requirements.

Since November the news has been very bad for this bank:

Does Citi have a capital crisis?

NEW YORK (Fortune) -- It's one of the hottest debates in the market right now: Is Citigroup short of capital?

Citigroup wounded by huge losses on mortgage-related assets and currently without a permanent CEO after Chuck Prince resigned Sunday, might lack the capital to weather a credit storm that shows few signs of abating.

The bank said Sunday that losses from mortgage-backed assets could be as high as $11 billion in the fourth quarter.

An expected $11 billion loss in the fourth quarter alone! Much more about the numbers and what they mean in that article.

More:

Citigroup’s Abu Dhabi deal is 'desperate'

Citigroup's attempt to bolster its balance sheet by selling a $7.5bn (£3.62bn) stake to the Abu Dhabi Investment Authority (ADIA) has been branded "desperate" by the analyst who first claimed that the bank needed to increase its capital base.

"They're desperate," said Ms Whitney. "This $7.5bn is just not enough money by a long shot." ... while adding that the company may be forced to sell more than $100bn of higher quality assets at a discount in order to raise cash.

Abu Dhabi Deal Raises Questions About Citigroup's Health

Selling a 4.9% stake in the company is a step that is not taken lightly. Nor is another round of massive layoffs. All things considered however, Monday's news reports on Citigroup raise more questions than they answer.

The one thing we do know for certain is that Citigroup was (and likely still is) severely capital restrained.

On November 5th I said Citigroup Is Fighting For Its Financial Life.

It still is.

Anybody who thinks that limiting the amount of cash depositors can withdraw from ATMs is just another ho-hum story to be ignored or being done for any reason other than to help their cash flow and pre-empt a run on this bank is not paying attention IMO.

This is deathly serious.
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[edit on 1/5/2008 by Gools]

Originally posted by Gools
Anybody who thinks that limiting the amount of cash depositors can withdraw from ATMs is just another ho-hum story to be ignored or being done for any reason other than to help their cash flow and pre-empt a run on this bank is not paying attention IMO.

This is deathly serious.

Gools is being deadly serious. When a bank cuts the amount you can withdraw, it's not due to "technical problem". They cannot afford it.

This is bad.

If customers start to withdraw all their savings this leads to a serious question.

Is the money there?

From reading this thread, I'd be having some serious doubts.

Citibank are saying the limits are due to "security reasons", but the financial blogs are not buying it at all. Neither am I.

There must be some sort of cosmic lining for this to coincide with capital problems

[edit on 5-1-2008 by infinite]

The two stories in my opening post state that this limit was imposed sometime in mid-December or in the "days leading up to christmas".

How odd that the story is just making it to the press now.

It looks like they tried to keep this quiet, but I'm guessing that there have been enough complaints that it has been brought to someone's attention in the media.

If you tell a bunch of people they can't do something you can be sure they will all go out and try to do it.

When this news makes the rounds people will start to question to motives behind this and this could in fact set off the bank run. Bank runs are psychological self-fulfilling events. Monday may be very interesting.

The articles also claim that this is for New York city only, so it would obviously be interesting to find out if any Citi customers outside NYC have had their cash withdrawal limits cut.

Any ATS members willing to find out for us?
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I don't get it... I've never had a bank allow more than $500 per 24hour period from the ATM. Security reasons as well. You can still go inside and make a withdrawal, however. If Citi was limiting all transfers and withdrawals I'd be worried. Perhaps this change in light of their other problems does mean something. But this alone, I just can't get there.

Originally posted by Gools
The two stories in my opening post state that this limit was imposed sometime in mid-December or in the "days leading up to christmas".

How odd that the story is just making it to the press now.
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It's not odd if you think about it.

The story was probably silenced because the media was focusing on "Worse Christmas for retailers" and didn't want someone to prove them right.

If it made the air, God knows what could of happen. You probably would of seen the run then.

Abu Dhabi to Bolster Citigroup With $7.5 Billion Capital Infusion


Gools...we were discussing this topic on another BB recently. Notice the use of the term "Capitol Infusion" in the heading you provided. Here's the rub; Cash is not Capitol...it's a medium of exchange. In reality, these soverign wealth fund transactions amount to Capitol Withdrawals...not "Capitol Infusions". Depreciating US paper i.e. "promises to pay", are being used to buy stakes in real US assets. Capitol is actually leaving the country.


Illustration from iTulip: A farm family which consumes more than its land produces by selling off a few acres every year. Common sense tells us that the farmer is getting poorer, not richer. Backward logic would have us focus on the money the farmer receives for his sales of capital...and call it an "inflow of capital", and forget that the real capital is actually moving the other way.


Then there's Merrill Lynch. In an attempt to cover 8BB in write-downs, Merrill recently received $4.4BB from the sale of stock to Singapore's Temasek...$1.3BB from the sale of Merrill Lynch Capital, to GE Capital...and an additional $1.2BB from Davis Selected Advisers....you guessed it...after the latest revisions...it wasn't enough. Reportedly, Merrill's John Thain is busy passing the hat to Chinese & Middle Eastern SWF's for an additional 4 - 7BB.

These funds remain a short-term fix on the respective banks balance sheet...there's no real benefit to economic growth...banks aren't lending.

After research, I lost faith in my personal bank, Wells Fargo. I went small-local.

Originally posted by apc
I don't get it... I've never had a bank allow more than $500 per 24hour period from the ATM. Security reasons as well. You can still go inside and make a withdrawal, however. If Citi was limiting all transfers and withdrawals I'd be worried. Perhaps this change in light of their other problems does mean something. But this alone, I just can't get there.

Exactly, the OP is adding 1 and 0 and getting 3.
Whenever I've signed at any bank upthey tell me about my 24 hour ATM limit and I say "great".

Why would you need more than $500 in cash unless you are buying something illegal?
Seriously, any amount more than that you could just as easily put on the same ATM card with the limit only being funds available in the account.

Unless of course its a transaction that can only be done in cash with a limited paper trail, like guns, drugs, prostitution, stolen goods, political bribe, etc.

Sure Citi-Bank is screwed, all banks are, on purpose.
Remember the Savings and Loan Scandal?
What happened?

The government funneled all these corporations money as a bail out, people made out like bandits, and this is exactly what they are doing now.

Last time it was 12 years of republican presidency that lead to this, and this time they did it in about six. Practice makes perfect.

Anyway, the Saudis own a stake in Citi-bank, help it fold with a smile.

I think it's more of an anti-theft measure than preventing illegal cash purchases. Before the advent of debit cards limiting ATM withdrawals meant if someone stole your card and PIN they couldn't clean you out.

My bank has ALWAYS set my daily withdrawal limit to $500, for over 15 years now. That's always been the way it's been here in New Zealand. It's a security measure.. I know I wouldn't want some dude getting more than $500 in the event of my card being stolen / pin-hacked. This is common sense. I don't get where the story is in this.. why the 'seriousness'?

My bank has had a $500 daily limit on Debit card purchases for years. You can still get as much out as you want with checks.

In November, 2007 shortly after Citibank's solvency issues began to surface...the bank sent-out a customer email titled: "Change to Inter Institution Transfers User Agreement"

Excerpt: "After a review of our security practices, the daily limit on Outgoing Standard (3-day) transfers was changed temporarily to $2,000 on October 30, 2007. That $2,000 limit will be made permanent with this upcoming change to the User Agreement."

Revised Agreement

The daily external transfer limit was reduced from $5,000 to $2,000, with a monthly cap of $10,000. It takes 10 months to withdraw $100,000 deposited on account...electronically. In a panic, it would take a-lot longer to empty a bank vault if depositors had to stand in a 5 block line. Besides, history tells us they could simply lock the doors.

Another 'security' issue...or impediment to an electronic bank run?

Convenient timing none-the-less.

Not only is the ATM daily withdrawal limit a good security measure, it's also a pretty good way of preventing the ATM from running out of cash.

In the U.K., it seems the average daily withdrawal limit is £300, but this can vary between around £200 and £1,000, depending on what sort of account you have and who you bank with.

During with busy Christmas period, when people are more likely to take cash out for presents/etc., it's very important that ATMs are kept fully stocked. In England we have a few bank holidays around this period (so customers are limited to ATM withdrawals only) and ATMs are prone to running dry. This just seems the more likely reason to me, although I'm no expert.