One dollar could buy a cup of coffee, a pack of chewing gum, or a roll of bathroom tissue.
For the first time, it could also buy a share of Citigroup Inc
The price of a Citigroup share on Thursday fell below $1 in a sign that investors are losing confidence that the lender, which operates in more than 100 countries, can be restored to health after $37.5 billion of losses in the 15 months ended December 31.
Shares fell as low as 97 cents, leaving the bank with a market value below $6 billion -- down from more than $277 billion in late 2006. The decline came even though Citigroup has gotten $45 billion of taxpayer-funded capital since October, and despite federal efforts to stimulate the economy and lending.
Citigroup was not immediately available for comment.
It's nothing but bad news, said James Barth, a finance professor at Auburn University and a senior fellow at the Milken Institute. One might have thought the stimulus from Washington would have had some positive impact, but nothing is turning around investor confidence. The concern is that there is a point at which the government looks at Citigroup and says, enough is enough.
Citigroup remains part of the Dow Jones industrial average <.DJI> of 30 blue-chip companies. Naomi Kim, a spokeswoman for Dow Jones Indexes, which maintains that index, said: We are watching the situation closely. Other banks in the index are Bank of America Corp
Vikram Pandit, Citigroup's chief executive, is trying to sell poorly-performing businesses and shed risky debt to cap losses, bolster capital and avoid the potential nationalization of New York-based Citigroup that many investors fear.
The Obama administration and regulators including Federal Reserve Chairman Ben Bernanke have said they do not want the government to take full control of the nation's banks.
In early afternoon trading, Citigroup shares had recovered some losses, and were down 8 cents at $1.05. The New York Stock Exchange has suspended until June 30 a rule requiring delisting of companies whose share price remains persistently below $1.
THROWING IN THE TOWEL
Citigroup was created in 1998 when Sanford Sandy Weill merged his Travelers Group Inc with Citicorp.
Weill then persuaded the government to repeal the Glass-Steagall Act, a Great Depression-era law that kept commercial banks from entering investment banking.
The bank was ultimately done in by massive bets on risky debt and securitizations, especially under Weill's successor Charles Prince.
These have led to two federal bailouts and a government agreement to share in losses on $300.8 billion of toxic debt. The government on Friday agreed to swap some preferred shares into common stock, giving taxpayers a potential 36 percent stake. Citigroup has eliminated its common stock dividend.
The loss of confidence is pervasive, said John Schloegel, vice president of investment strategies for Capital Cities Asset Management in Austin, Texas. With it officially going to a penny stock, those last few institutions are throwing in the towel.
Worries about the banking industry are a prime reason that U.S. stocks have lost more than half their value since late 2007, driving shares to levels last seen in the mid-1990s.
What's unusual today is that problems aren't contained to the U.S. banking industry, but have been exported to other industries and countries around the world through securitizations and the capital markets, Auburn's Barth said. No one knows where the losses are or how big they will be.
(Reporting by Jonathan Stempel; Additional reporting by Leah Schnurr and Deepa Seetharaman; Editing by Gerald E. McCormick)