It has come to this. Will the federal government allow the shares of Citigroup (C) to open for trading on Monday morning without a plan in place to support the bank or a buyer for the firm? The way the global markets work, a decision will probably have to be announced before Asia opens.

The risk or Citi trading with no news is that the plunge in its stock could continue. If there is any lesson from Lehman it is that a stock can move toward zero in the blink of an eye. Citi closed Friday at $3.77 but had traded as low at $3.05 that day. The idea that it could go to $2 or below if investors continue to lose confidence in its ability to survive is certainly within the realm of possibility.

All of the means that the three agencies which would be involved in examining the situation and offering alternatives–the Fed, Treasury, and the FDIC–need to decide whether to risk the possibility that traders will decimate the stock and step in once it is clear the institutional customers and retail depositors are fleeing in droves. Or, they can mitigate that risk by engineering a takeover of the bank by another huge financial firm like JP Morgan (JPM) or Goldman Sachs (GS). Neither appears to have any interest, but if the government will guarantee the value of most of Citi’s asset, a transaction might be attractive.

The other option frequently mentioned is a "government takeover" similar to the one the Fed did with AIG (AIG). Citi could easily require loans similar to those given to the insurance company–well in excess of $100 billion.

Under either set of circumstances, one which guarantees assets or one which puts up loans, the government will be on the hook for a nearly unimaginable sum.

But, if Citi opens Monday after a weekend of silence from all parties involved, the consequences could be devastating.

Douglas A. McIntyre

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