When it comes to sub-prime lending, some banks have thrown in the towel. HSBC has beat a hasty retreat. Wells Fargo has announced it will shutter all of its Wells Fargo Financial, which ran 638 storefronts. But Citi CEO Vikram Pandit (Vikram Pandit news) says his bank is staying the market. Even after shutting down 300 U.S. branches and transforming another 181 into loan-servicers, the operation still spans 1,300 storefronts. Pandit extols the virtues of sub-prime lending.

"So in a very different way, we think this is an extremely valuable business from a business perspective but, most importantly, from an American citizen perspective--my God, you don't want to shut this down; you want to keep it growing!" Pandit said in a conference call, reports the American Banker.

No doubt a lot of folks are in need of credit right now. The issue for banks is whether it's wise to extend that sort of credit. Given the recession, the answer increasingly is hardly an automatic no. For every firm exiting the sub-prime market, another one jumps in. Fortress Investment Group, for example, will be a large stake in the sub-prime consumer finance unit of AIG. Despite Pandit's strong defense of the operations, many are convinced the unit is up for sale, as it has been designated non-core.

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