Ed Lampert upped the ante on


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in the second quarter before the stock became a victim of the credit crunch.

RBS Partners LP, a fund controlled by Lampert's hedge fund ESL Investments, disclosed in a regulatory filing Wednesday that it held a stake of 24.8 million shares in Citigroup, valued at $1.3 billion, as of June 30. That marks an increase from the 15.2 million shares valued at $782.6 million that the fund reported owning at the end of the first quarter.

The move shows that Lampert is getting more aggressive about his position at the world's largest bank, where impatient shareholders

were hoping he would push for changes. Citigroup's CEO Chuck Prince has become the subject of intense criticism as the company's expenses have continued to grow faster than its revenue while he promised that change was at hand.

Lampert's position in Citigroup amounts to roughly 0.5% of its shares outstanding -- still a relatively small stake for an activist to gain much traction.

Known as a value investor with a penchant for taking an active role at companies where he owns stakes, Lampert has been a relentless cost-cutter at his various conquests, like

Sears Holdings


, the retail empire that he cobbled together by taking Kmart out of bankruptcy and using it to acquire Sears Roebuck.

But while Lampert's foray into the banking sector was welcomed by Citigroup's shareholders, it's not going well so far for the elite investors who are ESL's clientele. Shares of Citigroup got a pop in May when Lampert's position was made public, but since June 30, they're down 10% amid fears of a global liquidity crunch that has roiled the world's stock markets.

Sears Holdings, where Lampert is chairman and has a role in day-to-day operations, has fared even worse. Its stock has dropped by more than 20% since the end of June, as the U.S. housing slump that precipitated the problems in the credit markets has also stoked fears of a slowdown in consumer spending. RBS owns about 65.3 million shares of the retailer.

Despite impressive earnings growth at Sears Holdings amid cost cuts and share repurchases, sales trends at both its chains have continued to be negative, raising questions about the sustainability of its bottom-line performance.

Meanwhile, retailers are now battling headwinds on the economic front.


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just slashed its outlook for the back half of 2007, citing bad economic conditions resulting from high gasoline prices and weakness in the housing market, and

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Home Depot

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echoed those concerns with a disappointing report of its own.

Investors have long assumed that Lampert has a safety net at Sears Holdings in the form of a treasure trove of undervalued real estate assets that he can liquidate, moving the cash elsewhere to capitalize on his time-tested investment acumen. But with the credit markets in turmoil, real estate values are increasingly uncertain.

While it added to its Citigroup stake in the second quarter, RBS cut its stake in mobile handset maker


( MOT) to 625,000 shares, valued at $11.1 million, from 925,000 shares, priced at $16.3 million, in the first quarter.

It also scrapped its position at

Clear Channel Communications

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, having previously reported holding a $30.9 million stake. Clear Channel has agreed to be acquired by a private-equity group led by Thomas H. Lee Partners and Bain Capital.

The fund held onto stakes in auto-parts retail chains


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, where Lampert was previously chairman, and


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. Shares of both companies are down roughly 15% since the end of June.

All the declines in Lampert's portfolio came as stocks fell across the board in frenetic summer trading with market watchers trying to gauge the consequences of the nation's housing slowdown for the broader economy without panicking.

Lampert, through a spokesman, declined to comment on this story.