There is no recession, the economy's doing great!

[J]

CNN link

Steep selloff on Wall Street
Stock market tumbles as investors mull AmEx profit warning and potential Merrill Lynch writedowns.

NEW YORK (CNNMoney.com) -- Stocks slumped Friday morning as investors eyed American Express's profit warning and talk that Merrill Lynch may have to writedown billions more from credit market woes.

The Dow Jones industrial average (INDU) lost around 1.4 percent in the early going. The broader S&P 500 (INX) index and the Nasdaq (COMPX) composite both gave up around 1 percent.

American Express (AXP, Fortune 500) said late Thursday that it expects lower profit through 2008 because of slower spending and missed credit card payments. Shares of AmEx, a Dow component, slumped 9 percent Friday morning in active trading.

Merrill Lynch (MER, Fortune 500) may have to writedown $15 billion in bad mortgage bets when it posts results next week, The New York Times reported. Analysts currently expect the financial behemoth to take a $12 billion writedown. The company is also apparently seeking to raise $4 billion in capital. Merrill shares rose modestly.

Next week brings earnings from Merrill and four other big banks, including Citigroup (C, Fortune 500), and results are expected to be pretty dismal amid the continued fallout from the credit and mortgage market crises. (Full story).

Bank of America (BAC, Fortune 500) said Friday that it was buying Countrywide Financial (CFC, Fortune 500) for $4 billion in stock, rescuing one of the hardest-hit lenders in the housing market fallout. Countrywide shares slumped 10 percent after rising more than 50 percent Thursday on market rumors about the deal. (Full story).

Stocks pulled out a last-hour rally Thursday after reports about a potential Bank of America-Countrywide deal first surfaced, in a rare up day in an otherwise miserable start to 2008.

Fears that the economy could be sliding into a recession have dragged on stocks so far this year. On Thursday, Federal Reserve Chairman Ben Bernanke said that the central bank does not think the economy is in a recession and that the Fed is willing to keep cutting rates to keep growth from slowing too rapidly.

Merrill may writedown $15 billion
In other news, the government said Friday that the November trade gap swelled to its highest level in 14 months, due to record oil imports.

Treasury prices rose, lowering the yield on the 10-year note to 3.84 percent from 3.88 percent late Thursday. Treasury prices and yields move in opposite directions.

In currency trading, the dollar fell versus the yen and inched higher versus the euro.

U.S. light crude oil for February delivery fell 61 cents to $93.10 a barrel on the New York Mercantile Exchange.

COMEX gold for February delivery slipped $1.30 to $892.30 an ounce.

So let's see, banks are now taking significant writeoffs, Countrywide Financial almost went belly-up and was saved by a buyout by Bank of America, and American Express is showing profit warnings since customers are defaulting on their payments and spending less. Hmmm...I wonder how long it will be until we start seeing bank runs in the US?

[Stravo]

If you listen to some of the business news coverage on TV you would think the credit crunch is like the abominable snowman. It "might" exist and we have identified signs of it here and there but no one has positively seen the beast.

The more I am exposed to the financial world through casual viewing and work related concerns the more I am convinced that it is all bullshit. The entire market and the business models and forecasts associated with it are all just carefully contrived illusions to make investors believe its alright. Pay no attention to the subprime loan mess and the record high debts and foreclosures. No, there's nothing wrong.

The financial world has nothing really concrete to base itself on, its foundations seem to rest on belief and perception. Hell of a thing to base a world economy on.

[Illuminatus Primus]

If you listen to some of the business news coverage on TV you would think the credit crunch is like the abominable snowman. It "might" exist and we have identified signs of it here and there but no one has positively seen the beast.

The more I am exposed to the financial world through casual viewing and work related concerns the more I am convinced that it is all bullshit. The entire market and the business models and forecasts associated with it are all just carefully contrived illusions to make investors believe its alright. Pay no attention to the subprime loan mess and the record high debts and foreclosures. No, there's nothing wrong.

The financial world has nothing really concrete to base itself on, its foundations seem to rest on belief and perception. Hell of a thing to base a world economy on.

Sainted priesthood of the modern age. All it is. They might as well be cutting open chickens and divining the future from their entrails.

Ah, this is only the tip of the iceberg of fucked up investment banker shit I've heard from amongst my older friend in economics and finance.

[Broomstick]

Regardless of what is happening in the world at large, MY personal little world is having a recession or depression or whatever the hell you want to call it.

Still looking for a job. Still haven't got one. Still managing to get the bills paid thanks to unemployment benefits, but that's not going to last forever.

Might take the landlord up on the offer he made to loan me a tiller and convert the backyard into a garden so I can grow some of our food. One of the worst poverty complications is that both my husband have specific dietary requirements and restrictions based on medical issues (food allergies for me, diabetes for him). For example, much of the give-away charity foods are useless to me due to contamination with items I can't safely eat. But I can't do that until spring anyhow.

So far, the best thing the husband and I did was to avoid debt in the first place, and to really put 6 months of living expenses in the bank. Not in some long-term retirement account or "investment vehicle" but in the bank where we could access it at will without having to jump through hoops to get it or take penalties. Unfortunately, due to a number of family crisises over the past few years we didn't have the full six months' worth when my job ended, but we have enough for at least awhile.

I'm also still healthy and strong enough to do light physical labor - painting buildings isn't glamorous and it doesn't pay nearly what I used to get, but it is an honest living. So are another of other options open to me simply because I am healthy/strong enough to stay on my feet for hours at a time, lift things, climb up and down ladders, walk around, etc. Gives me many more options for desperate times.

Strange, though - last night my husband got real upset because my FAA flight physical expires at the end of the month and I said I didn't see a point in renewing it until I had the income to allow flying again. Sure, I miss flying but to me its obvious that the $100 or it would cost to renew a medical I would not be using for months at least would be better spent on food or the phone bill or the internet connection (which is how many jobs are applied for these days, apparently) or gas for the car. It was just weird how he got a LOT more upset about it than I happen to feel at the moment.

Anyhow, anyone who says with a straight face that there isn't something amiss with the US economy is deluded. We have got a LOT of problems, from the housing meltdown to people overextended on credit to a lack of savings to rising unemployment. Oh, and the health insurance thing... but I'll stop now as I need to get back to looking for a job.

[Stravo]

I'm sorry to hear about your situation Broomstick. I have a friend who has been trying to find a job now for 8 months because her husband's income just isn't enough to see their family through. She quit working to raise their daughter and he was making a ton of money flipping houses. Well...now you can imagine flipping houses no longer a viable option and he is completely over extended on credit. So she has to try and go back into the work market after being out for nearly 7 years.

She's having a horrible time and all I can think about is those assholes on the business news shows, Cavuto in particular, back in May/June crowing about how this is the best job market the US has had in American history believe it or not and telling College grads not to worry.

I can certainly see and feel a turn around already. Our bonuses this year were a tad on the flimsy side and the raises were shall we say anemic while friends who own houses for the first time in recent memory are really worried about their own or family members' mortgages.

[Darth Wong]

She's having a horrible time and all I can think about is those assholes on the business news shows, Cavuto in particular, back in May/June crowing about how this is the best job market the US has had in American history believe it or not and telling College grads not to worry.

People like that look at the economic growth figures and to them, that is the entire economy. They don't have to care where that money is actually going, and how many people aren't seeing a dime of it. They've got their share, so life is good.

[Admiral Valdemar]

Buying power is key. Your raise could be twice what you get nominally. If it can't buy half of what you used to get, then you have a situation that won't be economically tenable if it persists.

The CPI cutting out food and energy because of their volatility shows that you can't gauge inflation well from the currently published Govt. charts and figures without your own work. Energy and food are the biggest increases in costs for households today, to the point of food riots in China, Italy and Mexico and fuel protests in Great Britain, Indonesia and Argentina.

A few billion here, a billion there and soon you're talking real money, as they say. These banks writing off such debts are just the tip of the iceberg, to echo IP. The UK has already seen a run on a bank, the first in 150 years and on a rather large lender in mortgages to boot. Barclays and HSBC have tightened credit allowances and Citibank sold a good chunk of itself for peanuts that Third World nations normally expect to Dubai.

Many see this as the sunset of growth in the industrialised world. There is no peak at the end of this trough, at least, not the peak we'd like.

[Broomstick]

What Mike said ^

As I've mentioned before, the husband and I saw this downturn coming. We didn't know when, exactly, it would happen but as long as two years ago we started getting ready - paying off what little debt we had (mostly a car loan), refining our budget, saving SOMETHING every paycheck.

That is NOT the position of those who listen to the pundits and assume that because someone has a degree in finance and services multi-million dollar customers that their advice is always applicable to the private individual of lesser means.

If the economy is booming and I'm unemployed in a sense the booming economy doesn't matter to me - I'm not getting any. If the economy is tanking but I'm cleaning up to me everything is fine.

In my job search I find much available for $8-10/hour, which would barely keep a roof over our heads with no money for savings, retirement, or any luxuries (remember, we have monthly medical expenses, too) I'd settle for $20/hour (which is less than I was making before) but such openings are few and many are competing for them.

Hell, I'll settle for $10/hour if the choice is that or starvation, but I want to live, not merely exist.

An additional pouring of salt-into-wounds is the "helpful" suggestion that my husband get a job. Sorry, he is disabled. Really. We're not kidding. We're trying to get him on official disability but what a fucking nightmare of a process THAT is!

[Dartzap]

Energy and food are the biggest increases in costs for households today, to the point of food riots in China, Italy and Mexico and fuel protests in Great Britain, Indonesia and Argentina.

That only happened once, and after a while the general public got rather miffed and told the protesters to go take a running jump.

When was that anyway? 2000, wasn't it?

[Admiral Valdemar]

September, 2000. I remember, because it took nearly two hours to do a 45 minute trip to college. The petrol station forecourts were full with people queueing around the street and the supermarkets were near empty before the army was about to be called in.

[Erik von Nein]

The Wall Street Journal is now reporting that the odds of a recession are up, based on an economist survey. They still say it's only around 46% chance of happening.

ECONOMIC FORECASTING SURVEY

Odds of Recession Seen Rising
Economists in Survey
Predict Slower Growth,
Unemployment Increase
By PHIL IZZO
January 11, 2008; Page A2


Economists surveyed by The Wall Street Journal see increasing odds of a recession this year along with mounting inflationary pressures, an uncomfortable mix that could play a role in shaping the 2008 presidential campaign and complicate life for the Federal Reserve.

In the latest monthly survey, economists put the chance of recession at 42%, up from 38% in December and 23% just six months ago. On average, the 54 forecasters who participated see the economy expanding at less than a 2% annual rate in the first and second quarters. Last month's survey estimated 2007 growth at 2.5%.

"The U.S. economy in 2008 will be like a cat on a hot tin roof that has already used up eight of its nine lives," said Stuart G. Hoffman of PNC Financial Services Group Inc. Amid rising unemployment, higher oil prices and troubles in the credit and housing markets, "you worry about the cumulative effect that it all has on psychology," he said.

On the political front, most of the respondents expect a Democrat to be elected president this year, although they personally prefer a Republican. Some 56% disapprove of President Bush's handling of the economy, about the same as the 59% of the public who disapproved in a recent Wall Street Journal/NBC News poll.

Three economists forecast a recession in 2008. Setting off the alarm bells was last month's jump in the nation's unemployment rate to 5%. "Historically, this has invariably been associated with recession, typically starting immediately and almost always within three months," Goldman Sachs Group Inc. said in a research note.

The economists expect the unemployment rate to be 5.1% by June and 5.2% by December; both predictions exceeded earlier forecasts. They also expect the economy to add just 74,000 jobs a month during the next year, the fewest since the question was added to the survey in 2004.

Price pressures are expected to increase this year. The average forecast for the year-to-year rise in the consumer-price index was 2.7% by June, up from 2.5% in the prior survey. That would make the Fed's job harder. Consumer prices were 4.3% higher in November 2007 compared with a year earlier, a figure pushed up by a surge in oil prices.

While the economists predicted the Fed's preferred measure of inflation -- the personal consumption expenditures index, excluding food and energy -- will rise just 2% in 2008, in line with the central bank's own predictions and at the top end of its comfort zone, higher oil prices are expected to drive inflation at least in the near term.

Though the Fed will worry about rising prices, economists still expect the central bank to cut interest rates by at least another half percentage point over the first half of the year. Indeed, in a speech yesterday, Fed Chairman Ben Bernanke, opened the door to a "substantive" rate cut, saying the "outlook for real activity in 2008 has worsened." But Mr. Bernanke said he didn't expect a recession.

The continued uncertainties and the Fed's response to them so far appear to have taken some of the shine off Mr. Bernanke. When asked to grade the Fed chief, economists on average gave the chairman a score of 80 out of 100, the lowest mark of his tenure.

"If he were an Olympic skater, his technical score would be close to a 9 or 9.5, because we have gotten a lot of stimulus in monetary policy in recent months. His artistic score, or the execution of those moves, however, are closer to a 3.5 or a 4, which would knock him out of medal territory. There is no performance without passion and conviction," said Diane Swonk of Mesirow Financial.
WSJ.com's Phil Izzo analyzes the results of the survey and the remaining options for heading off a recession.

With the chance of recession rising, the economy is overtaking Iraq as voters' top concern, polls show. Michigan, where the Republican race heads next, has been hit hard by foreclosures and a loss of manufacturing jobs.

When asked whom they expect to win the presidency, 63% of the economists in the survey picked a Democrat -- with their choice split between Illinois Sen. Barack Obama, with 33% of the total, and New York Sen. Hillary Clinton, with 30%. (The survey was conducted before Mrs. Clinton's win in New Hampshire.) Republican Sen. John McCain was the pick of 30% of economists, with two other Republicans, former New York Mayor Rudy Giuliani and former Arkansas Gov. Mike Huckabee, each getting 3%.

However, when asked their personal preference, the economists favored Republicans. Sen. McCain led the field with 39% of the forecasters' votes, compared with 11% for Mr. Giuliani and 7% for former Massachusetts Gov. Mitt Romney. Among Democrats, Sen. Obama edged Sen. Clinton, 14% to 11%, while former North Carolina Sen. John Edwards took 4%.

"People are looking for change," said Susan Sterne of Economic Analysis.

Some 56% of the economists disapproved of President Bush's stewardship of the economy, while 44% approved. That is especially startling considering 59% of the economists said the stock market performs better under Republican presidents, compared with 28% who said it favored Democrats. Most economists who disapproved of Mr. Bush cited an increase in government spending. Many praised the president's tax cuts.

However, the economists expressed doubt the tax cuts, which are due to expire at the end of 2010, will be extended. The top marginal tax is 35% on ordinary income and 15% for dividends. When asked what those rates would be in 2011, the economists, on average, expected a 38% tax on ordinary income and a 22% tax on dividends. "The Bush tax cuts will leave with Bush," said Neal Soss at Credit Suisse Group.

Though the slowdown will increase the focus on the economy in the run-up to the November election, analysts said it will have recovered to some extent by the time the next president takes office. "Length of recession doesn't vary very much: about three quarters and that's it," said David Wyss of Standard & Poor's, who isn't predicting a recession.

President Bush is considering an economic-stimulus package, but it isn't clear what kind of measure might pass Congress.

Separately, a global financial group predicted yesterday that global growth will slow this year, largely due to the crisis in the U.S. for subprime loans.

The Institute of International Finance, which has 370 member organizations, said the turmoil has damaged banks in Europe and worsened "fragile confidence" in Japan. It expects the U.S. to avoid a recession -- but predicts growth will be a relatively weak 2.3% this year. The group expects Europe's economy to expand 2.1% and Japan 1.3%.

Growth in developing and emerging markets, meanwhile, will slow from its feverish pace but remain quite strong, the group predicted, adding that "among concerns not as yet widely discussed are house prices in many [developing] countries that are higher than those in the United States."

--Kelly Evans contributed to this article.

Write to Phil Izzo at philip.izzo@wsj.com

[Justforfun000]

Broomstick Wrote:

An additional pouring of salt-into-wounds is the "helpful" suggestion that my husband get a job. Sorry, he is disabled. Really. We're not kidding. We're trying to get him on official disability but what a fucking nightmare of a process THAT is!

My condolences as well hon. It sucks to be in your position right now and I truly hope something comes up that relieves you of your financial burden.

Just wanted to say that things are not much different in Canada when it comes to disability. It takes FOREVER to go through the process. Most people would be dead before they'd finally get approved.

Well that's a bit of an exaggeration, but still...it's very difficult and long.

[Aaron]

My condolences as well hon. It sucks to be in your position right now and I truly hope something comes up that relieves you of your financial burden.

Just wanted to say that things are not much different in Canada when it comes to disability. It takes FOREVER to go through the process. Most people would be dead before they'd finally get approved.

Well that's a bit of an exaggeration, but still...it's very difficult and long.

CPP Disabilty is supposed to take a maximium of four months. And that's how long it took for mine, which is better than VA. The thing with CPP isn't the time but getting a ruling in your favour, there very anal and chances are your not going to get much.

[Gerald Tarrant]

This is Krugman's take on the recession

The signs point increasingly to an imminent, or perhaps already begun, recession. Ben Bernanke has in effect pledged to do whatever is necessary. But does the Fed have what it takes?

Some musings:
Monetary policy mainly exerts its influence through housing: high interest rates squeeze home construction, low rates encourage it. Interest rates have much less direct effect on business investment. The reason? Housing lasts much longer.

Suppose you take out a loan to buy a machine whose economic life is only 5 years — which is highly likely, given both physical wear and tear and technological obsolescence. How much difference does it make whether the interest rate on the loan is 4 percent or 6 percent? Not much: the monthly payment on a 5-year loan at 4% is less than 5% lower than the monthly payment on a loan at 6%. So interest rates don’t have much effect on business investment.

On the other hand, suppose you buy a house with a 30-year mortgage. The monthly payment on a 4% mortgage is more than 20 percent lower than on a 6% mortgage. So interest rates make a lot of difference to housing.

So here’s what normally happens in a recession: the Fed cuts rates, housing demand picks up, and the economy recovers.
But this time the source of the economy’s problems is a bursting housing bubble. Home prices are still way out of line with fundamentals:

So: is it even possible for the Fed to cut interest rates enough to create a renewed housing boom? (The Fed can cut the overnight rate all the way to zero, but even large changes in the overnight rate can have only modest effects on mortgage interest rates, if the market perceives those changes as temporary.) If it can’t, how much can the Fed really do to help the economy?

Those aren’t rhetorical questions. I’m actually not sure how bad things will get — remember, we still have help from booming exports. But it’s not too hard to tell stories in which monetary policy doesn’t have enough mojo to deal with our current problems.

From here

For the record, Krugman has been predicting a recession since roughly when Bush took office.

[Elfdart]

So let's see, banks are now taking significant writeoffs, Countrywide Financial almost went belly-up and was saved by a buyout by Bank of America, and American Express is showing profit warnings since customers are defaulting on their payments and spending less. Hmmm...I wonder how long it will be until we start seeing bank runs in the US?

Not to worry: Once Rupert Murdoch appoints Dr. Pangloss as editor-in-chief of the Wall Street Journal you won't hear any more about recessions (regular or double-dip). That is, unless the Democrats win the election.

[Justforfun000]

Cpl Kendall Wrote

CPP Disabilty is supposed to take a maximium of four months. And that's how long it took for mine, which is better than VA. The thing with CPP isn't the time but getting a ruling in your favour, there very anal and chances are your not going to get much.

Exactly. They fight you every step of the way, and you'd swear they turn everyone down the first time by routine just to see who will give up. I've only rarely run into people that got it without an appeal.

[The Grim Squeaker]

The Wall Street Journal is now reporting that the odds of a recession are up, based on an economist survey. They still say it's only around 46% chance of happening.

Well, if it was 51% then it would be as good as 75%, wouldn't it .

[Edi]

There was a very good article in today's Helsingin Sanomat in the economics section about the current US situation and how it has close parallels or even identical situations to the Finland of circa 1990. Which means that if it turns out for you as it did for us back then, it's going to be a really spectacular crash. It took nearly ten years for us to recover and that period saw our financial sector almost completely decimated, with small banks falling down left and right. The public predictions of optimism in the US are nohing but pure bullshit.

[brianeyci]

19k jobs were lost in Canada this month. It was totally unexpected, and totally shocked the economists. It was the front page news for a day. They are covering their ass saying it's because job creation numbers were overreported in the past two months, and that Canada's isolated from the US economy.

But the real reason is the weakening US economy. It's a hidden indicator, if anybody needs any more reason to forsee a US crash.

[Gerald Tarrant]

There was a very good article in today's Helsingin Sanomat in the economics section about the current US situation and how it has close parallels or even identical situations to the Finland of circa 1990. Which means that if it turns out for you as it did for us back then, it's going to be a really spectacular crash. It took nearly ten years for us to recover and that period saw our financial sector almost completely decimated, with small banks falling down left and right. The public predictions of optimism in the US are nohing but pure bullshit.

Any chance you could toss up a brief summary of the similarities?

Speaking for myself I have no knowledge of Finnish economic history, but the parallels would be interesting.

I know that Japan has had terrible growth in the 90's due to lots of bad debt that their banks were carrying, that's the only foreign parallel that I had been aware of.

[Gerald Tarrant]

19k jobs were lost in Canada this month. It was totally unexpected, and totally shocked the economists. It was the front page news for a day. They are covering their ass saying it's because job creation numbers were overreported in the past two months, and that Canada's isolated from the US economy.

But the real reason is the weakening US economy. It's a hidden indicator, if anybody needs any more reason to forsee a US crash.

I would have figured that it was the outgrowth of a weaker dollar. A stronger Canadian Dollar makes Canadian imports more expensive, which would hurt exporting industries. There's some predictions that America's larger trade partners will feel a similar pinch in their export related sectors.

Is there any information as to which sectors took the job loss?

[brianeyci]

I would have figured that it was the outgrowth of a weaker dollar. A stronger Canadian Dollar makes Canadian imports more expensive, which would hurt exporting industries. There's some predictions that America's larger trade partners will feel a similar pinch in their export related sectors.

Is there any information as to which sectors took the job loss?

Yes, heavy hits in manufacturing.

If it was the stronger dollar it should've happened months ago, and why didn't the economists predict it? Plus the dollar has been cooling off lately.

Whatever it is, it seems a small hit compared to the big problem downstairs... Fed can't stop the housing bubble from bursting, but housing is relatively isolated from Canada since any other country could gobble up our product, not easily but it could happen. But it's the first major job loss in years, and the month before there was one hundred thousand job gain. So it's a symptom of a greater disease.

[Admiral Valdemar]

There was a very good article in today's Helsingin Sanomat in the economics section about the current US situation and how it has close parallels or even identical situations to the Finland of circa 1990. Which means that if it turns out for you as it did for us back then, it's going to be a really spectacular crash. It took nearly ten years for us to recover and that period saw our financial sector almost completely decimated, with small banks falling down left and right. The public predictions of optimism in the US are nohing but pure bullshit.

Actually, if I can find some of the articles I've read in recent weeks, I can say that what the US (and by extension all of us) is facing is totally unprecedented because of the present economic model. That, when combined with the peaking in energy sources, climate change and food problems, means that recovery is a fairly shaky term to throw around. It took Japan nearly two decades to pull out of a recession. I don't see a global scale event like this being recoverable in any of our lifetimes by virtue of the factors in play now that have never been an issue before.

Even in '29, the US made its own products, had a major industry, had no debt and energy was going up and dropping in price all the time with advancing technology to help people do more with less and get fed.

Some are expecting housing prices to fall a further 40-50%. If that happens, you can be sure that major banking institutions that used this packaged debt in their system will be as vulnerable as a Prussian Blue fan in Harlem. The UK government is thinking of doing more to help the Northern Rock. What are they going to do when MORE big banks face similar accounting hiccups? They can't save them all, and so far their actions indicate they saw the Rock tanking as being a one off, panic induced event. That they then went and guaranteed an amount in personal savings that they then quietly retracted because it'd, y'know, bankrupt the nation, doesn't fill me with confidence either.

Economists? They show the same hit-to-miss ratio as any of the coinage in my wallet. May be heading for a recession? If Shadow Government Statistics is to be believed, we've been in one for months and are well on our way to depression.

[J]

Looks like Citibank is in trouble...

CNBC Linky

Citigroup's Layoffs Could Reach 24,000 This Year

Citigroup plans to announce a writedown of as much as $24 billion and layoffs that could total as much as 24,000 due to subprime and credit-related losses, CNBC has learned.

Citigroup plans to announce a $24 billion writedown and layoffs that could total as much as 24,000.
The plans will be unveiled Tuesday by Citigroup's new CEO, Vikram S. Pandit, after the banking giant reports fourth-quarter earnings. At the same time, Citigroup could also announce that it is cutting its dividend payment.

Citigroup is likely to cut between 17,000 and 24,000 positions over the course of the year through a combination of layoffs, attrition and selling off businesses as part of Pandit's cost-cutting plan, sources said. Previously, it was estimated that the layoffs could reach 20,000.

Pandit is looking to avoid taking a charge to earnings that's usually associated with large-scale layoffs, which is one reason he's considering a number of staff-cutting initiatives besides outright firings. It's unclear if he'll announce a specific number of job cuts on Tuesday.

A Citigroup spokesman had no immediate comment.

Citigroup also intends to raise as much as $15 billion from various foreign and domestic entities including Saudi Arabian Prince Alwaleed bin Talal, Citigroup's largest individual shareholder, as America's biggest bank grapples with heavy mortgage market losses.

Alwaleed has owned his Citi stake since the early 1990s and helped engineer a previous rescue plan for the bank more than a dozen years ago. According to a report on the Wall Street Journal's Web site, he is likely to keep his total stake in the bank below 5 percent to avoid regulatory scrutiny.

By raising so much captial, CEO Pandit is hoping layoffs can be kept to a minimum.

Although word of the expected layoffs was having little impact on Citigroup shares, the company's options were among the most actively traded Monday. The activity was most concentrated in the January contract, implying investors are positioning for an announcement Tuesday, according to Andrew Wilkinson, a senior market analyst at Interactive Brokers. However, some investors also were taking defensive positions in the February contract with traders entering long positions on a total volume of more than 12,000 lots at the 27.50 strike, he said.

[Admiral Valdemar]

I hear China wants to acquire sections of Citi too, despite them having their own financial hiccups.