Citigroup is currently valued at about $20.5 billion. It received $25 billion from the Treasury already, and is now poised to receive another bailout. Here’s how they got to where they are.

There, Citigroup’s chief executive, Charles O. Prince III, learned for the first time that the bank owned about $43 billion in mortgage-related assets. He asked Thomas G. Maheras, who oversaw trading at the bank, whether everything was O.K.

Mr. Maheras told his boss that no big losses were looming, according to people briefed on the meeting who would speak only on the condition that they not be named.

For months, Mr. Maheras’s reassurances to others at Citigroup had quieted internal concerns about the bank’s vulnerabilities. But this time, a risk-management team was dispatched to more rigorously examine Citigroup’s huge mortgage-related holdings. They were too late, however: within several weeks, Citigroup would announce billions of dollars in losses.

Normally, a big bank would never allow the word of just one executive to carry so much weight. Instead, it would have its risk managers aggressively look over any shoulder and guard against trading or lending excesses.

But many Citigroup insiders say the bank’s risk managers never investigated deeply enough. Because of longstanding ties that clouded their judgment, the very people charged with overseeing deal makers eager to increase short-term earnings — and executives’ multimillion-dollar bonuses — failed to rein them in, these insiders say.

Today, 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.

Explain to me why we’re wasting money on this bank? Citi’s problems aren’t what the bailout was sold to us as–not knowing the value of assets, etc. Citi’s problem is that it was horribly mismanaged. Why shouldn’t we let them go into bankruptcy, exactly? Really, I have no idea.

UPDATE (Dave Schuler)

Without defending the bailout in answer to Alex’s question I think that Citigroup is being bailed out to prevent a bank run both here and abroad. The banking industry is enormously more centralized than it was 70 years ago. Citigroup’s failing would be like thousands of 1930’s-era banks failing.

Update (Steve Verdon): I don’t think letting Citigroup go into bankruptcy would have anywhere near as bad as letting the New York Bank of the United States go into fail utterly. When it failed the New York Bank of the United States had 450,000 depositors and was the fourth largest depository bank in New York. And keep in mind that $20.5 billion today would have been $1.58 billion back in 1930. So saying it would be like letting thousands of banks fail strikes me as alarmist. Would it be bad? Yes, would it be a catastrophe that would have brought down the entire financial sector? No probably not. Keep in mind that while things are not like they were in 1930 there are additional safe guards such as deposit insurance backed by the government of upto $250,000 to name just one difference.

This could be a problem since many institutional investors and pension funds are barred from owning stocks below $5 dollars, and that could produce a massive sell-off of the stock that would further reduce the price.

“That’s the danger of crossing that $5 threshold,” says Owen Malcolm, senior vice president of Sanders Financial Management in Atlanta. “They’re (Citigroup) already in trouble. It could get worse.”

Money managers don’t necessarily have to sell Citi immediately. But they would have to get out before the end of the quarter if the stock doesn’t recover and may opt to do so now to mitigate potential losses.

Of course, I have no worries that Citigroup will be deemed too big to fail and they will get a boat load of money from the government, then go have a huge party in Hawaii. This is America dammit! And we prop up our losers.

“It’s getting to the point where it’s make-or-break time for Citigroup,” says Ryan Detrick, an analyst at Schaeffer’s Investment Research in Cincinnati. “It doesn’t look promising.”

For Citigroup, a Dow component and one of the world’s biggest financial institutions, the reversal in its stock price is stunning. The stock was trading at over $20 a month ago and $31 a year ago. It has plunged nearly 90 percent in nearly two years.

Citigroup shares have lost one-third of their value in the first three days of this week as investors worried that Pandit’s plan to cut expenses by 20 percent and eliminate 52,000 jobs won’t restore the bank to health.

Citigroup has lost $20.3 billion in the last year and taken tens of billions of dollars of writedowns on mortgage and other toxic debt. Analysts expect it to lose money in the fourth quarter, and some don’t expect it to be profitable in 2009.

Once again, the problem with bailing out companies that are “too big to fail” is that not only does it send a message to the upper management of that company, but to all companies, that their irresponsible behavior will be tolerated. That they can take risks they otherwise might not and not have to face the conseuqences.

I have to say this is rather amusing in a grim sort of way. Quite a few supported the bailout which was supposed to prevent this very thing. We have Citigroup teetering on the edge of disaster. Bank of America is down to $11.25/share whereas a year ago the price per share was over $40. Morgan Stanley is down to $9.20/share from over $50 a year ago. Goldman Sachs is down to $52/share down from $200/share. The $700 billion was supposed to stop this. But now we see it isn’t working. We’ve basically wasted $700 billion. To those who supported the bailout, what should we do now? Wait let me guess…another $700 billion?