Citigroup has begun big layoffs, Also raises Credit Card Rates

My mortgage is with these people. At least I don't have their credit card. This is why I always thought it was strange when Citigroup was trying to buy other banks.

A day after the bank's shares sunk under $10 for the first time since the 1990s, Chief Executive Vikram Pandit and his deputies instructed officials to slash their budgets for employee compensation by at least 25%, The Wall street Journal reported. See related story.
The paper added that managers could minimize the number of employees they fire by dismissing higher-paid traders and bankers.

Shares of Citigroup managed a modest gain in early trading Friday, bucking a downtrend in the financial sector and rising 3.5%.

Citi's layoffs are the latest in a brutal round of job cuts across the financial industry. The cuts have been sparked by unprecedented losses due to bad credit investments, as well as the subsequent precipitous drop in banking and other financial services business amid the worst economic conditions in 70 years.

Citi said raising rates for up to 1 in five card customers

Meanwhile, Citi is reportedly also notifying some of its credit-card customers that their interest rates are being raised by an average of three percentage points, the report said. Citigroup is one of the nation's largest issuers of credit cards, with 54 million active accounts.

The report cited an unnamed source as saying the rate increases would apply to less than 20% of Citigroup's card portfolio.

Earlier this month, Citigroup said that it lost $1.4 billion in the third quarter from credit card securitizations and that it expects such losses will continue, possibly reaching record levels in 2009.
The result compared to a gain of $169 million from credit card securitizations in the year-earlier period.

Those comments showed that Citi, like other firms, was unable to package up, or securitize, the loans it makes to customers and sell them into the secondary market.

A higher interest rate would make the difficult-to-sell loans more attractive for secondary market buyers, as well as make them more productive should Citi have to keep them on their own balance sheet.

At that time, in a filing with the Securities and Exchange Commission, Citi cautioned, "credit card losses may continue to rise well into 2009, and it is possible that the company's loss rates may exceed their historical peaks."