An economy and nation in crisis

A global economy in free fall, banking giants like Citigroup tetering on the precipice of collapse, auto giants like General Motors facing insolvency, faltering wars on two fronts: No President-elect in modern times has faced so much crisis as he approached inauguration day.

The question of whether or not Barack Obama is up to the job is no longer relevant. He has the job and the question now is what he will, or can, do with it. Obama says his top priority is the economy but he will face equally daunting problems on almost every front.

His promises of hope, his message of change and his perceived ability to rally a nation drowning in pathos will be challenged and he must move quickly to establish his leadership and prove his competence.

Reports The Associated Press:

With the economy in free fall, President-elect Barack Obama is stepping up efforts to let Americans know what he has planned to stabilize the nation’s financial system and calm the markets.

He announced a plan this weekend to save or create 2.5 million jobs by January 2011 and his transition team confirmed he will announce the leaders of his economic team Monday, naming Timothy Geithner as treasury secretary and Lawrence Summers to direct the National Economic Council.

The word Friday that Geithner was the likely choice to head treasury sent the stock market soaring almost 500 points.

So much bad news is dragging down the markets these days in the way of weak earning reports and looming bankruptcies for major companies like automakers, that traders — and the public — are desperate for any reassurance that the problems will be dealt with at some point.

While Obama’s choice as Treasury Secretary appears to have spurred the market, the problems continue. Reports The New York Times:

Citigroup, once the nation’s largest and mightiest financial institution, has been brought to its knees by more than $65 billion in losses, write-downs for troubled assets and charges to account for future losses. More than half of that amount stems from mortgage-related securities created by Mr. Maheras’s team — the same products Mr. Prince was briefed on during that 2007 meeting.

Citigroup’s stock has plummeted to its lowest price in more than a decade, closing Friday at $3.77. At that price the company is worth just $20.5 billion, down from $244 billion two years ago. Waves of layoffs have accompanied that slide, with about 75,000 jobs already gone or set to disappear from a work force that numbered about 375,000 a year ago.

Burdened by the losses and a crisis of confidence, Citigroup’s future is so uncertain that regulators in New York and Washington held a series of emergency meetings late last week to discuss ways to help the bank right itself.

And as the credit crisis appears to be entering another treacherous phase despite a $700 billion federal bailout, Citigroup’s woes are emblematic of the haphazard management and rush to riches that enveloped all of Wall Street. All across the banking business, easy profits and a booming housing market led many prominent financiers to overlook the dangers they courted.