So, what changed? What happened in the past fortnight to trigger such a crisis of confidence in Citigroup, once the world's largest bank? Although the abstract loss of confidence is hard to measure, manifestations of the slide in credibility were easy to monitor. On November 4, Citigroup shares were traded at $14.68. By Friday evening they were only $3.77.

What changed was the collective view among American regulators and on Wall Street that the current sums of capital that US banks have kept on their books will be insufficient amid rapidly deteriorating economic conditions. Banks are currently required to hold enough capital on their books to represent 8 per cent of their total assets.

Chris Whalen, of Institutional Risk Analytics, the Wall Street consultancy, says that the Federal Deposit Insurance Corporation (FDIC), America's bank guarantor, has changed its mind on what is a prudent level of capital needed as a cash cushion in times of extreme financial stress. He said: “The banks just don't have enough capital. What you are seeing now is that the FDIC is being more proactive, they are forcing banks to merge that are far from bust. They don't want to wait for a Northern Rock to happen in the US.”

Wall Street now reckons that Citigroup needs to raise between $50 billion (£33 billion) and $100 billion to shore up its books. With the debt markets effectively closed and Citigroup unable to raise funds through the equity market with its devastatingly weak share price, that capital will have to come from the US taxpayer.

Although Citigroup received $25 billion last month from the US Treasury's bailout scheme, this second rescue will have to be different. Amid many flaws in the Treasury bailout, the Troubled Asset Relief Programme, one was that using taxpayer money to buy preference shares in troubled banks did not offer sufficient comfort to the markets. It is now expected that Washington will buy ordinary stock in Citigroup and become a straightforward, full investor.

As expectations emerged last week that Washington would take a major stake in Citigroup, Wall Street also assumed that the move would wipe out existing shareholders in the process. Those investors will not be the only victims of this bailout. It is also widely expected that Morgan Stanley and Goldman Sachs will not survive in their current form in the short to medium term.

Mr Whalen said: “They are just not big enough to survive. It comes down to credibility. They both have far too much transactional risk with their derivatives business and everything else. Morgan Stanley will probably get bought by the Japanese. The question is: who gets Goldman? I reckon it could either be US Bancorp, which would run the show, or maybe Deutsche [Bank]. This isn't over.”

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