Citigroup shareholders could get crushed

The government "stress test" of Citigroup's (C) finances apparently shows that the bank needs to raise $10 billion. Since that company's market cap is only a little over $16 billion, the requirement could crush current shareholders.

Of course, the odd thing about the government's test is that the banks can dispute the findings. That makes the process a bit different from a college final exam and has raised the question in some quarters about how objective a test can be if disputing the findings is part of the process.

According to The New York Times, "the bank may be able to plug that hole with recent and future measures to raise capital - like asset sales and a big stock conversion plan - that could leave it with more than enough funds to satisfy regulators." If that is not enough, Citi has proved it has other options.

The big American bank has already sold many of its Japanese units for over $7 billion. Citi could consider selling other assets like its international consumer banking business.

Whatever Citi is forced to do the save itself, it will look nothing like the company Sandy Weill built and that will continue to raise the question of whether he should have build it at all.

Douglas A. McIntyre is an editor at 24/7 Wall St.

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