As JPMorgan Chase & Co and Wells Fargo

Topics: EconomicsHousing

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Last updated: December 27, 2019

As a resultof the prolonged Great Recession, the American GDP fell drastically since 2008alongside with rising unemployment rate in the country. For the year 2008,Citigroup experienced a huge loss amounted at $27,684 million. This was mainlydue to the financial market shocks as well as the collapse of housing andmortgage bubbles. According to Appendix A (Excel), revenue reported for year2008 was $51,599 million, 33% lower than that in 2007.

Furthermore, theoperating expenses and provision for claims of the group was approaching $104billion in 2008, which substantially increased the amount of net loss incurred.In 2009, Citigroup’s revenue rose up to $80,285 million, credit to the FederalReserve’s efforts in boosting confidence level in the economy. On November 23,2008, the US Treasury decided to inject $20 billion investment into Citigroupin exchange for immediate equity stocks and securities. Despite the fact thatthis was only a part of the whole bailout, it effectively boosted theconfidence level amongst investors. In the next trading day, both theCitigroup’s share price and Dow Jones Industrial Average rose significantly (Ellis,2008). The major competitors of Citigroup were all benefited from thisgovernment decision to recover expectation in the financial system, with Bankof America Corp rose 27.

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2%, JPMorgan Chase & Co and Wells Fargo & Coall advanced more than 20% in share price performance on NYSE (Wilchins , 2008). Numbers ofresearches shown that the U.S. asset prices in the stock exchange market reactrobustly to unanticipated monetary policies on the federal funds rate targetdecisions.

Andersen, Bollerslev, Diebold and Vega (2003) and Faust, Rogers,Wang and Wright (2007) studied the impacts of real-time monetary policies andmacroeconomic news on the U.S. exchange rate changes, and found that thedynamics between the two are substantial.

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