President Obama proposed a new set of regulations which would limit the size and scope of banks as well as prevent banks from participating in risky business ventures such as running hedge funds. As a result, the financial industry reeled yesterday on wall-street causing many investors, including the US Federal Government, that has a multi-billion dollar stake in Citigroup (NYSE: C), to lose big.
The government currently has a 27% stake in Citigroup, which it received in exchange for providing bailout aid, dropped in value by more than $1.5 billion yesterday after fears that President Obama’s new onslaught of regulations would make profitability a near impossibility for Citigroup and other large-cap banks.
As a result of the news, Citigroup’s stock price dropped 5.5%, or 19 cents, yesterday. Bank of America dropped 6.2% and JP Morgan dropped 6.6%. The bearish opinion on bank stocks helped cause the Dow Jones Industrial Average to tumble by 213.27 points or about 2%. The Standard & Poor’s 500 index fell 1.9 percent and the Nasdaq lost 1.1 percent.
