Goldman Sachs has downgraded Citigroup, the nation's largest bank, estimating that it will have to take a $15 billion hit due to its exposure to the subprime meltdown. Two weeks ago, Citigroup estimated that its mortgage related write-downs would total from $8-$11 billion as its CEO, Charles Prince "resigned."

Goldman analyst William Tanona wasn't thrilled with Citigroup's decision to pink-slip its CEO:
"The lack of leadership at this point in Citi's storied history could not have come at a worse time," Goldman analyst William Tanona wrote in a note to clients. "With deteriorating consumer and housing metrics, Citigroup is facing mounting pressure across many businesses." Citigroup's stock is down 39% on the year, and Tanona fears that the subprime debacle may be spreading to the consumer credit markets:
Goldman estimated Citigroup will have to book $15 billion in write-downs over the next two quarters related to its $43 billion in exposure to complex securities called collateralized debt obligations. Citigroup already has said it expects to see a loss of $8 billion to $11 billion on those positions. Goldman expects the bank to take the full $11 billion hit and then another write-down of $4 billion in the first quarter, an estimate based on weakness in indices that serve as proxies for the value of mortgage-related securities.

The situation isn't very sunny outside of the investment-banking unit, either. Citigroup will feel "the pain" of a worsening consumer-credit environment in its retail banking and cards divisions, the Goldman note said. Gosh. It sounds like Citi needs a hug.
HSBC warned today that the subprime meltdown is spreading into credit cards and other types of consumer loans, says the NYT. The bank announced that it will be taking a larger write down than it forecast, due to the spreading delinquencies.

"We are seeing a re-evaluation of asset classes in U.S. real estate and this is going to continue," HSBC's chief executive, Michael Geoghegan, said on a conference call with analysts. "We're not through the credit crisis yet." ... "Early stage delinquency rates in both cards and branch unsecured lending are also showing signs of deterioration," HSBC said in a statement. The bank will now be setting aside $3.4 billion to cover bad loans.

Wise Bread has an interesting post detailing 7 reason why one of their writers uses her credit card for everything. She finds it a useful tool for maximizing efficiency. Everything is all in one place! If you don't carry a balance and are good with a budget, why not use a credit card as an organizational tool?

It's great for accounting and spending reports. Since I don't dole out cash, or make purchases on my debit card (and I rarely use cheques), all my monthly spending is nicely bundled into one report: my monthly credit card statement. Not only that but my current credit card of choice actually categorizes my spending for me, so at a glance I can see how I've spent my pennies for the month and year-to-date.

I don't need to carry cash. Trips to the bank machine are few and far between, as $60 can last months depending on my spending needs.

Automated billing is great. Cell phone bills, utilities, cable, you name it. If I can sign up for automatic billing, I do. It doesn't mean I don't look at each carrier's statement to ensure the charge is correct. But it does mean that on a monthly basis I don't have to worry about paying any bills (other than my credit card!) - they're already paid.Do you use your credit card this way?

Elizabeth Warren of Harvard Law, our very favorite consumer debt expert, gave an interview to Marketplace this morning in which she talked about the rising cost of so-called "fixed expenses" and their affect on the American consumer. Harvard Professor Elizabeth Warren has spent a career looking at personal debt. I asked her if consumers can sustain the engine of our economy much longer.

Elizabeth Warren: No, it's not sustainable. We've built this latest economic boom on borrowed money. Consumers, to the extent that they've stayed afloat, have managed to stay afloat by using their credit cards and by taking out home-equity lines of credit.

Krizner: And they've used that credit for what? For lattes and microwaves and expensive vacations? Have Americans been over-consuming?

Warren: I wish that were the case, but the data say otherwise. Americans are in a lot of debt not because they're overconsuming, but because of big fixed expenses that they really can't wiggle out of.

Krizner: When you say "fixed expenses," what are you talking about?

Warren: Where American families are getting ruined financially is in the areas of mortgages and health insurance. The fact that they've got to have two cars, the fact that they've got to put their children in child care, their taxes -- the things over which they have little or no control.

Krizner: But can that really be the whole story? I mean, in gross numbers, consumption has tripled, apparently, in about 20 years. Surely a good chunk of that is discretionary spending.

Warren: Let's look at the basics. What families are spending on clothing in the last 30 years, it's down 33 percent in inflation-adjusted dollars. What they spend on food is down about 20 percent. What they spend on appliances, down about 52 percent. It's not stuff that's driving families to the poorhouse.