Pressured Citigroup Spins Off Brokerage
Smith Barney Deal Is Step One as Bank Forced to Raise Cash

By Binyamin Appelbaum

Federal regulators have taken an unusually active role in the affairs of Citigroup, telling the New York financial giant that it must raise capital from private sources and take whatever steps are necessary to restore investor confidence in its financial viability, according to people familiar with the situation. Citigroup’s deal to spin off its Smith Barney retail brokerage, announced yesterday, is the first step in a broader plan to sell valuable business units to raise the money that the company needs to endure, those sources said. “Whatever regulators are doing is basically known only through press reports. What is so wrong with a formal enforcement order? We do it for the First Bank of Two Bits,” said Karen Shaw Petrou, managing partner of Federal Financial Analytics.

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