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Citigroup turns to a veteran troubleshooter

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Associated Press / November 7, 2007

NEW YORK - Citigroup Inc., after revealing it may have to write down $8 billion to $11 billion of its debt this quarter, named Richard Stuckey to help it untangle the complicated subprime portfolio that may lead to a fourth-quarter loss for the bank.

In 1998, Stuckey helped Citigroup extricate itself from losing bets on Long Term Capital Management, a Connecticut hedge fund that collapsed. The failure and bailout of LTCM is regarded as the last time the global credit markets were as tight as they are this year.

Citigroup has direct subprime exposure of $55 billion, $43 billion of which is to collateralized debt obligations. CDOs are instruments that bundle different kinds of risk, and some include pieces of bonds backed by mortgages given to subprime borrowers, or those with poor credit history.

What has been worrying investors is not only that Citigroup, the nation's largest bank, may have to take losses, but that those losses could end up being even wider if the credit markets don't improve.

Jeffrey Harte, managing director at Sandler O'Neill & Partners LP, lowered his stock price and earnings expectations for Citigroup, noting that he anticipates another $4 billion loss in 2008 besides the fourth quarter's potential $11 billion loss.

In a memo to Citigroup's global capital markets business, the company said it was creating a subprime portfolio group to be led by Stuckey. Mark Tsesarsky, another Citigroup veteran, will assist in risk management for the group.

Citigroup's chief executive, Charles Prince, stepped down on Sunday. Robert E. Rubin took over as chairman, and Win Bischoff is acting as interim CEO until a search committee can find a replacement for Prince.

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