Citigroup was the hardest hit among the biggest US banks after it reported a loss of $7.6 billion in the fourth quarter of 2009. The losses can mainly be attributed to the cost of repaying $20 billion worth of government bailout as well as failed loans. Despite the significant losses, Citigroup plans to give its top executives large bonuses.

Citigroup’s Diminished Stature

The report released on Tuesday reveals what analysts’ suspected all along. It also highlights the banks’ struggles as well as its diminished stature in the banking sector. Along with other big lenders, the bank was also forced to set aside $8.18 billion as coverage for the loans their clients can’t repay. Unlike its major competitors though, Citigroup no longer has enough buffer against losses because it has shed its brokerage and investment banking unit during the crisis.

Right now, the company has no choice but to concentrate on loans which isn’t a large money-maker due to the uncertainty today. While worrying, John Gerspach, the bank’s chief financial officer, said that credit card loans and mortgage loans that are delinquent are starting to stabilize. This provides a lot of hope for the company. Gerspach added that “the US credit store is still very much developing.”

However, an analysis by Alois Pirker from Aite Group said that Citigroup is in a “higher risk position” because it is trying to compete with other big banks its size without its investment banking unit or trading operations.

JPMorgan Chase and Others Still Cautious

Citigroup’s report contrasts sharply with JPMorgan Chase & Co when it reported an earning of $3.28 billion during the same quarter. This growth can be attributed to its investment banking unit. JPMorgan also reported that it has set aside $7.28 billion as coverage for failed loans. Company executives added that it is unsure whether it will be able to stop adding to this reserve.

Get the best value from your money, literally. This New Year, why don’t you shop around for the best bank, the best broker, or the best financial institution? Now is the time to change the way you save, invest, or complete everyday transactions. The amount of money you can “earn” by simply choosing the right medium to save, spend, or invest is significant.

For example, if you actively use credit cards, why don’t you choose a company that provides air miles, big discounts, or 0% interest rates? It is easy to do it. Likewise, why would you want to keep your money in an account with 1% interest earnings when you can find a bank that will give you 4-5% for it? If you’re tired of getting the short end of the stick, do something about it. The list below gives you some clue about things to keep an eye for if you want to get a good deal.

Rate Nerd uploaded a new post “Best Checking Accounts to Start 2010”. It is a very helpful post because it enables consumers to pick and choose among competitive offers in the market. Some of the checking accounts even offer up to 5.01% API for checking accounts. Check out the featured offers listed on the blog to get a feel of what your decision should be like this New Year.

Deal Maven @ Bankaholics posted an article titled “Get a Good Rate and A Free HDTV.” This offer is available from Irwin Union Bank. The amount of money you earn depends on a large part, on where you live. The Irwin Bank website will ask you to enter your zip code to know the rate for your location. The lowest rate is 1.90 API. Want a bonus? The bank also lets you get a 22-inch Sharp LCD TV. But the catch is you need to have $20,000 for investment.

Brian O’ Connell @ Main Street featured a weekly roundup on his blog on the post titled “Banking Deals of the Week: Jan 6”. He commented that while banks have a wait-and-see attitude, their interest rate deals don’t look as attractive as it could have been.

It shouldn’t come as a surprise but many are still concerned about the increase in auto loan delinquency during the third quarter of this year. More Americans were late in their loan repayment as job cuts and lay-offs continued. The auto delinquency rate is determined by the amount of people who fall behind 60 days or more on their repayments.

It edged up to 0.81 percent in the July-September quarter. This increase reflects both seasonal trends and the weak economy. It’s actually quite common for late payments to occur during this period because borrowers focus on other expenses. Many of them get back on track during the first and second quarters. But amid these worrying figures, there are some bright spots.

Washington DC, for example, experienced a significant rate decrease in delinquency. Other states such as North Dakota, South Dakota, Colorado, Louisiana, Maryland, and Vermont also saw a decrease as well. North and South Dakota typically have the lowest delinquency rates in the United States for all kinds of loans. It is the improvements see in states like Louisiana that can be seen as a sign of recovery. Year-on-year, the state’s auto delinquency rate plummeted by over 14 percent.

While it is too early to say for certain, some analysts believe that the some spots in the country are starting to recover faster than the others. The relatively small increase in delinquency compared to 2008 also reveals that these types of loans are quite difficult to get today because financial companies have raised their lending standards.

Meanwhile, consumers are also trying to cut spending and taking on fewer loans. The rate of auto delinquency followed the results of mortgage delinquency. On the other hand, credit card delinquency mellowed in the third quarter from the second.

Ordinary Americans are angry but it seems that some people are angrier. Wall Street bankers are simply furious with the way the Obama administration has tried to rein in executive pay. Large bankers including the Bank of America have covered their ire with comments that these efforts may hurt the very organizations that the government wants to save.

According to the spokesperson of BoA, Scott Silvestri, “People want to work here but they want to be paid fairly.” He added that the competition is identifying the top performers within the bank and luring them with fair-market compensation. Previously, BoA has received $45 billion worth of bailout funds from the US government.

Measures Taken by the Administration

The Treasury Department has slashed the pay rate for executives in ailing organizations such as the American International Group, Citigroup Inc., and the Bank of American by as much as 50 percent. Meanwhile, the Federal Reserve is also taking a tougher stance. It has recently announced stricter guidelines with regards to executive compensation.

Basically, it will be more reliant on risk management. These measures are aimed at controlling what the Obama administration refers to as “unchecked risk taking fueled by excessive pay.” The cause of the financial crisis is, to a large extent, attributed to the $1.6 trillion in losses in the financial sector as well as the 7.2 million job cuts in the United States.

Even with new guidelines in place, the top positions in the bailed-out companies are still lucrative. Robert Benmosche, the chief executive of AIG, has received $10.5 million in compensation. He also assured employees that they won’t be forced to return the money they’ve already collected. On the other hand, the Goldman Sachs Group set aside $11.4 billion for salary and bonuses for the first half of the year.

The financial industry is mainly designed to supply capital into the real economy. They should provide aid wherever it is needed most in the market. It is not supposed to be an end in itself. However, certain flaws in the sector’s structure enabled it to become a powerful entity that is capable of sucking the real economy into oblivious. And because it is prone to fraud, it threatens the nation’s economic stability, even democracy itself. Among the flaws that can be seen includes the following:

It Has Become Too Big

Financial institutions should mainly act as a “middlemen” that enables capital to flow through the markets. Similar to all middlemen, it should be kept as small as possible while accomplishing its goals. If that is not the case, its structure makes it become parasitical. This is exactly what happened. Since the financial sector became larger than what was necessary, it dwarfed the same economy that it is supposed to serve.

It should also be noted that it uses the capital for its own benefit. Whatever amount remains afterwards is misallocated. Financial sector rewards the already-rich while depriving individuals who need credit and additional capital most.

Causes Crisis around the World

Although the current economic crisis generates the most attention to the faults of the financial sector, it is not the first in their list of misdemeanors. As if that’s not enough, big banks are capable of causing devastating failure to the world economy. It has become very unstable while retaining its power. The industry has enough influence to convince Congress that their accounting rules work, though it is merely an attempt to hide their losses.

Contributes to Inequality

The predation of the financial industry has become so bad that it now controls the upper one percent of the country’s income distribution. As a result, income inequality has widened. This can cause massive problems not only to the economy, but to the social welfare of the citizenry as well.