Bad Week for Banks Punishes Sector Funds

While Citigroup(C Quote) shuffles its boardroom deck chairs at the insistence of the U.S. Treasury, the stock price plunged 59% last week to less than $1 a share at one point Thursday.

Other financial-services companies fared almost as poorly. So for the five trading days that ended March 5, the average financial-services sector fund we track lost 10.4% of its value, excluding inverse funds that do short selling.

The government, now a 36% owner of Citigroup as of Feb. 27, cajoled Citigroup to allocate at least eight of the 15 board seats to independent members. More importantly, Citigroup announced an attempt to exchange preferred stock for common shares. All this uncertainty about the structure of the company, with quarterly losses expected to continue, has pushed the cost to insure Citigroup debt against default to an all-time high. ...