The Bailout of Citigroup moves forward (Is this book ever going to be finished?):

“Treasury and the Federal Deposit Insurance Corporation will provide protection against the possibility of unusually large losses on an asset pool of approximately $306 billion of loans and securities backed by residential and commercial real estate and other such assets, which will remain on Citigroup’s balance sheet. As a fee for this arrangement, Citigroup will issue preferred shares to the Treasury and FDIC. In addition and if necessary, the Federal Reserve stands ready to backstop residual risk in the asset pool through a non-recourse loan.

In addition, Treasury will invest $20 billion in Citigroup from the Troubled Asset Relief Program in exchange for [$27 billion of] preferred stock with an 8% dividend to the Treasury. Citigroup will comply with enhanced executive compensation restrictions and implement the FDIC’s mortgage modification program.”

Un-fricking-believable.

The US is guaranteeing $306 billion on bad investments (So much for Capitalism without failure). For Citi, its a great deal — but its a terrible one for taxpayers.

The dividend payment has been restricted to one cent per quarter for 3 years. Can someone explain why even a penny is allowed?

Where is the “Protection” for the taxpayers? Where are the clawbacks? How about going after the idiots that bought a third of a trillion dollars worth of junk, and then got paid large on it? Where is the sense of outrage and justice?

At what point do taxpayers demand that the people responsible for creating this mess must pay their pound of flesh?

>

Sources:
Joint Statement by Treasury, Federal Reserve, and the FDIC on Citigroup

http://www.federalreserve.gov/newsevents/press/bcreg/20081123a.htm

Citigroup Gets Government Guarantees on $306 Billion of Assets
Bradley Keoun
Bloomberg, Nov. 24 2008

http://www.bloomberg.com/apps/news?pid=20601087&sid=aBdUcxoRPkp4&r

U.S. Approves Plan to Help Citigroup Weather Losses
ERIC DASH
NYT, November 23, 2008

http://www.nytimes.com/2008/11/24/business/24citibank.html

U.S. Agrees to Rescue Struggling Citigroup
Plan Injects $20 Billion in Fresh Capital, Guarantees $306 Billion in Toxic Assets
DAVID ENRICH, CARRICK MOLLENKAMP, MATTHIAS RIEKER, DAMIAN PALETTA and JON HILSENRATH WSJ, NOVEMBER 24, 2008

http://online.wsj.com/article/SB122747680752551447.html

Category: Bailouts, Corporate Management, Credit, Derivatives, Finance

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

72 Responses to “Citi Bailout”

  1. and, to the pos(e)ter, in nearby thread, who was calling out Meredith Whitney for not ‘forecasting’ that C was going to Zed…

    Guess What?

    BR, even had a vid clip of her, from CNBC, calling for much, much, much, lower prices for C, et al., and that “WaMu” “should be on forefront of everyone’s minds..” –seems like she, in fact, nailed it dead-center.

    Past that, most of these “Banks”, that survive, in Name only, will, eventually, become, ever-more, Transparent Beards for the USGov’t/FedRes Duopoly–until, of course, that Beard, for the /beautiful Creatures spawned @ Bretton Woods y San Francisco, is no longer necessary..

    or, differently, to this query: “At what point do taxpayers demand that the people responsible for creating this mess must pay their pound of flesh?”

    A: When we choose to Stop living in Fear, and can accept: “We are apt to shut our eyes against a painful truth… For my part, I am willing to know the whole truth; to know the worst; and to provide for it.” –Patrick Henry– as one the basic Compass Points needed to orient ourselves out of this morass

  2. Steve Barry says:

    Funny how the kneejerk reaction is for C and futures to rally…I say the futures should plummet, as our free market capitalistic system is repealed at an incredible rate.

  3. Steve Barry says:

    If this bailout works for existing equity holders, which I doubt, we just bailed out Alaweed too.

  4. philipat says:

    The Market cap of C is only $28 Billion. WHy not just have the Saudis buy it? Oh sorry, that’s not permitted is it? Foreigners can piss money away in ultimately diluted shares in US Banks but can’t control them? This is also a part of the US model of free market capitalism in a free market?

    OK, the why didn’t the US Government just buy it? Would have been a cheaper deal!

  5. BG says:

    This is a test!

    Who said, “I reported this first on CNBC…….”?

    I get so sick of hearing this over and over and over. This guy must be a really insecure prick! He is so afraid that someone/somewhere gets one ioda of credit for anything. And hell NO, I ain’t buying his fucking book!

    Lastly, President-Elect Obama will go down in history apparently as being the worst president ever…e even before he even gets into Office. We are now witnessing just how skewed the views of this network are and how it will never report things honestly. They seem to forget all about the fact we currently have an Administration that is still in Office that has been totally inept for the last 8 years; but instead prefers to try to pin their horrible legacy (that I hope we VOTERS NEVER FORGET) on Obama. It is totally ridiculous and absurd.

  6. philipat says:

    But Mothership GE is making out just nicely thank you very much!

  7. constantnormal says:

    What really sucks is the impact that the continued bailouts to the incompetent dino-banks will have on smaller regional and local banks, who have to compete with federally subsidized monsters. How does a small, well-managed regional bank compete against this sort of thing?

    I suppose the same way that Toyota, Honda, et al, compete against the Big 0.3 — by providing better products and service, without worrying so much about competing on price (where the competition is much more difficult, due to the Big 0.3′s rich Uncle Sam).

    (sung to the tune of “Goodbye Columbus”)
    Hello Life!
    Goodbye Capitalism …

  8. BG says:

    Hint:

    “I said this first” and ” I did this” and “I did that”……

    I am sorry; but, I’m throwing in the towel on this guy. I have given him the benefit of the doubt for way too long. He sealed his own deal with me.

    I’m just tired of it.

    There is also another guy with the initials of JK that is heading down that same path. This network is nothing but a Republican mouthpiece; which I don’t mind at all if they would just report the truth.

    So far I think Obama has done an excellent job in getting ready to take Office; but, this crowd takes a swipe at him (and any non-Republican) every single chance they get.

    Are they so stupid that they think we viewers don’t pick up on that?

    It seems Mr. JK has also picked up on Mr. “We”. JK is a lot like CG and wants his credit. These guys are so smart in their own mind.

    Enough ranting! Sorry!

  9. Steve Barry says:

    Citi is now a public utility that pays no dividend.

  10. philipat says:

    How do Banks make money going forward if they won’t use the yield curve? This was previously known as banking?

  11. Steve Barry says:

    Philipat:

    I agree…the whole system is now changed. In fact, those who like to throw up charts comparing this recession to past recessions, or this market to other markets or sentiment measures to other bears and say we are ready to bounce, throw it all in the garbage. The only other analog this has is 1929…and there is a chance 1929 will be a picnic compared to this.

  12. Archiphage says:

    Maybe there is no outrage because someone needs to at least understand A) what is going on,
    and B) that it is wrong. I think only a minority knows A and a vanishingly small minority knows B. Besides, what has getting outraged gotten anyone recently besides possibly tasered?

  13. matt says:

    Detroit v. Wall Street:

    Detroit: Several weeks/months of begging for 25 billion of bailout money

    Wall Street: No begging necessary; short time frame

    While most companies rent seek through lobbyists, the Wall Street banks have a much more efficient delivery mechanism–they get their own people in the appointed (unelected) financial positions in government (and then lobby anyways for cover)

  14. philipat says:

    Steve,

    I’m already in Bali and hunkered down. Life is good here and not so expensive, which after the last few years is fortunate! Still, it;s a beautiful evening, 27 degrees (Don’t know what that is in old fashioned degrees, 80 or so I guess?) and my second glass of Pinot tastes great. Agree, this is the big one. See you in Bali?

  15. njdoc says:

    Gee, where will they get the money? Tax increases or spending cuts? Well, I am sure Gentle Ben has an alternative financing methods all warmed up, what’s a few extra copies of Franklin cost anyway. Got Gold?

  16. Namazu says:

    In a free market system, someone or something must fail here. Unless there’s some legal way to claw back the bonuses that were made creating this mess, the Citi needs to be put to sleep.

  17. Patrick Neid says:

    At this time it is a little humorous for anyone to act shocked and dismayed by the bailouts. From the first day a few months ago when the ideas of any kind of “plans” were first floated if you found yourself thinking that there was a necessity or merit to such twaddle go to the back of the line. The reality of the marketplace is there are no “plans” when the tide goes out. To even suggest that there are solutions is to reveal a serious lack of financial history. These are our current leaders. Yikes.

    Thankfully the market knows this and is taking the culprits outside and shooting them. As usual with politicians, the cure is worse than the disease. Sadly Obama and coming crew are cut from the same bolt of stupidity cloth. There is no intervention they don’t relish.

  18. Boomer108 says:

    Every business meeting I’ve ever been in with people from Citigroup has included about 12 people, more of whom didn’t say anything, while the 1-2 “experts” uttered their pronouncements. Then you could never get an answer from them. We would have to go to the top three people to get anything to happen. They had about 25 smart people in the place, and 10,000 total idiots – -this just in banking.

  19. Bruce in Tn says:

    The Citi bailout is quite interesting…

    I notice that the Fed has now pledged more than half of our GDP for the bailout (7.4 trillion)…with numbers this large, I would assume this means that Steve Barry may have to chip in too…..

    http://www.bloomberg.com/apps/news?pid=20601103&sid=arEE1iClqDrk&refer=us

    Also, in the latest episode that shows the inmates truly are in charge of the asylum, the large homebuilders are screaming for bailout money…and there are just soooooo many ways this is counterintuitive…

    http://online.wsj.com/article/SB122748520112251743.html?mod=rss_whats_news_us

    Anyway, happy Thanksgiving…

  20. ReturnFreeRisk says:

    I am sorry. I do not see that the situation is entirely one sided Barry. I do not work for a bank, btw. This is the way I see it:
    1) Everyone participates to varying degrees in a big housing and credit bubble. Banks take on large liabilities (their fault) and get sold large amounts of fraudulent mortgages by shady mortgage lenders who go out of business later.
    2) The bubble bursts and the populace is NOT ready to bear LITTLE or ANY of the losses. They are not paying mortgages, not paying auto loans, etc etc. If it is only collaterlalized by the asset, just give it back.
    3) The banking system is bankrupt – we can either let them go bankrupt OR backstop them. Hence the bailouts. The management at the banks should bear some of the responsibility.

    MY PROBLEM IS NO ONE, REPEAT, NO ONE IS SAYING ANYTHING WHAT SO EVER ABOUT THE GENERAL POPULATION’S ROLE IN THIS BANKING BUST. THE BANKS FORCED THE PEOPLE TO BUY HOUSES, THE AUTO DEALERS FORCED THE PEOPLE TO BUY CARS AND CIRCUIT CITY FORCED PEOPLE TO BUY LCD TVS ON THEIR CREDIT CARD AND NOW THE PEOPLE CAN’T PAY. IS THAT THE REAL STORY?

  21. with this:

    Steve Barry Says:

    November 24th, 2008 at 6:54 am
    Philipat:

    I agree…the whole system is now changed. In fact, those who like to throw up charts comparing this recession to past recessions, or this market to other markets or sentiment measures to other bears and say we are ready to bounce, throw it all in the garbage. The only other analog this has is 1929…and there is a chance 1929 will be a picnic compared to this.

    one might have to let the spooler warm up, and hit Print. Something tells me its invaluable compared to the ‘Notes’ Stammerin’ Hank has his ‘graph on..

    the only question I have is, what happens first: 1.) the BEP/USTreas reintroduces denominations larger than U$D 100, 2.) Cash is outlawed, and/or, 3.) the U$D, itself dies an overdue death..

    I’ll ask again, Who has bets on the U$D seeing 2010?

  22. John Borchers says:

    You had to use a little common sense here. How could they let C stock go to $0? All other banks would then be $0. The stock market would have crashed terribly. Many bonds would have become worthless.

    The Gov’t finally got a clue and is going in the right direction!

  23. ReturnFreeRisk says:

    There is nothing left to do but to backstop the existing banks. Citi will eventually be broken up and sold in pieces. The losses on the spending binge of past 10 years is now being socialized. That is the reality for us idiots who were responsible and saved. We are going to be screwed. This episode is the great equalizer between savers and borrowers. The borrowers have brought down the system and are being bailed out at the expense of the savers. Depression is the alternative. Anyone?

  24. DP says:

    They can’t let the “big 3″ go under after this, or if they do they’d better deploy the national guard to Detroit first. I wonder how the average person in Detroit feels waking up to this news today?

  25. Archiphage says:

    You mean people still live in Detroit?

  26. backman says:

    All over the country people are being forced to live with the consequences of their lousy investment decisions–their houses, their eviscerated retirement accounts, their overtapped credit–everywhere, that is, EXCEPT in the financial sector. Do the bondholders in the citi deal take a hair-cut (to zero)? Are the shareholders going to be wiped out? Not and not. And in fact, as the bondholders continue it means that the surviving entity, which is attached via intravenous to the Treasury, will continue to drain scarce resources from the surviving bank. It’s an outrage, through and through, but people have become inured to the large numbers and otherwise feel helpless to do anything except wire their little ‘virtual’ complaints to their virtue-less public representatives, who evidently have bought the ‘systemic failure’ kool-aid and are frozen into immobility no matter how large the raid on the purse.

  27. jc says:

    A friend of mine received an email on Sunday afternnon reminding her that all CITI accounts have unlimited deposit insurance, she had closed her accounts there a couple weeks ago.

    I think CITI might be experiencing a run.

  28. awilensky says:

    Barry you gotta put on your cape and help us out~ Call someone, Batman, Superman, anyone, Wonderwoman.

    We are being robbed twice, once by the banks and twice by the Gov. I was NOT for the Auto bailout, but now, I figure, shit, it looks like chump change compared to what is happening in the finance cesspool.

    When does this end, what is the game? Is there something bigger afoot other than gross incompetence? I don’t mean the incompetence of the financial centers, I mean the Treasury!And the Fed! I’m not so sure Geithner is the right guy.

  29. jc says:

    “Guarantees”, the devil is in the detils, just think about it $320B given out in a secretive W/E deal, wow, are we inured to everything ?

    What means guarantee? Who is guaranteed CITI or their counterparties? Are the guarantees for 100% of face value when their market value is under 10%? When & how can CITI convert this nearly worthless paper to cash? How are these guarantees valued against Paulson’s nearly depleted $350B warchest, does he do his own version of “mark to market”? I’m sure he has committed the US well beyond his already unprecedented authority. Why did F&F common shareholders get wiped out but not CITI shareholders?

    Who is next? CITI CFO said the guaranteed paper was “typical” of assets held at big banks, most of the big banks are trading around $10 so they are only a bad week away from a similar bailout.

    US invested $45B into a company with MV of $20B and gets 8% ownership and $8% interest, GREAT DEAL!

  30. urbandigs says:

    this is why you have to have some gold in your portfolio. They are bailing out everyone, and BR you know as well as I that a TARP 2 program will have to come out at some point because the remaining 250Bln or whatever is no where near enough to both recapitalize and buy /guarantee distressed assets.

    They scraped the original TARP plan because way too many banks were lining up to offload toxic assets, and 700Bln wasnt close to enough

  31. jc says:

    CITI had been trying to get this deal for months but they needed a crisis to get a secretive, sweetheart weekend deal. Early this week they took $17B onto their BS and wrote off $1.5B and the stock nosedive ensued.

    A message here for any other bank that wants access to the US treasury, just precipitate a “crisis” and keep your next weekend open.

  32. Pete says:

    BR wrote -”Un-fricking-believable”

    Sure is . Surreality continues . Where we will end up ?

  33. fooishbar says:

    Actually, the 0.01 dividend is the only thing that makes sense…

    Pensions funds would have to sell all of their citigroup holdings if it paid no dividend.

  34. urbandigs says:

    ahhhh, is that why? There had to be some reason for that.

  35. larster says:

    News Flash!

    Rubin will be given a new post in the Obama administration- vice chair of CITI, a subsidiary of the US government. Shareholder suits may be filed with the Justice Department in DC.

  36. DP says:

    So does anyone think this changes the long term picture for Citi and alters the chances of them actually still existing in 2011?

  37. Mannwich says:

    I’m still somewhat amazed how docile the public has been while this is unfolding. Should I be? Is everyone just in collective shock or we really that passive, ignorant and dumb collectively? Wait, don’t answer that question.

  38. Bruce N Tennessee says:

    And just how do we really calculate what C is worth?

    http://optionarmageddon.ml-implode.com/2008/11/17/citis-leverage/

    Citi’s Leverage

  39. Robertm73 says:

    Anyone wonder where the $300 Billion guarantee is coming from? Who gave the Fed money to do this?
    Not from the TARP cause only $60 Billion or so was left. Thin air? No the rules of physics still apply. Printing Press? Must be. Ben “the Printer” must have gone into overdrive. The only question left is how long the music will play before it all crashes down.

  40. greenie says:

    CitiGroup saved????

    Can anyone please tell me why Citi is up today? This chart looks just like WAMU before it died…

    So, the US government guarentees the crap on the books and we should all be happy!!! NO is the simple answer, these companies are still being run by the same “risk” people who put the firms in trouble.

    Same if you save GM, Ford and Chrysler…The old way that they ran the companies did not work….Time to let someone big (outside of wall street) fail….Wake up management and boards at other companies..

    UGH

  41. bri says:

    2 competing phenomena happening of late:

    1) the complete lack of sensitivity to main street on the parts of the corporatocracy in DC and Wall Street. it’s as if our leaders never heard of the Internets and still believe they can pull shit off under the cover of night.

    2) the speed and savvy of main street in understanding the awfulness of it all.

    the outrage is coming.

  42. super_trooper says:

    What’s too big to fail? What would happen if Citi had to file for Chapter11, while the government puts in guarantees that will prevent it from filing for chapter 7?

  43. VoiceFromTheWilderness says:

    Going after the idiots? Sorry guys, bad news, the idiots took over control of the political process quite sometime ago, and the politicians, pundits, & voters they bought (or fooled) took over the judiciary, and law enforcement, so that 1) they cannot and will not be prosecuted for anything. In fact there are plenty of people going around on TV telling us how horrible it is that we would dare even think about finding perpetrators and lawbreakers. But more importantly 2) they have now been promoted upward into a new permanent aristocracy for them and their families. See point 1) for some of the powers of this aristocracy. Also see todays action re Citibank for some others.

    The Times they are a Changin’

  44. Mannwich says:

    Does anyone else notice the blatant rank hypocrisy (I know you do, CNBCSucks) by CNBC when it comes to bailing out Wall Street vs. the Autos? It really is shameful and sickening. For Wall Street, any/all bailouts are a good (even great thing) but for another industry/entity, it’s wrong, wrong, wrong and basically “anti-free market”. Why do I have this channel on in the background all day? They really do suck.

  45. Amos Satterlee says:

    The same arguments used to diss Big Auto — outmoded management structures, goofy compensation packages, inappropriate products, etc. — are the same arguments used to justify saving Big Money. Shameful.

  46. Bruce N Tennessee says:

    In defense of the White House, this headline about the C bailout was incorrect….

    http://uk.reuters.com/article/businessNews/idUKTRE4AM2CH20081123

    White House says unaware of any Citigroup rescue talks

    It should have read:

    White House says unaware of Anything….

    Reuters apologizes for any implied competency….

  47. CPJ13 says:

    BR,

    Small suggestion, should be a quick fix in WP coding. Make any links from TBP (in comments, or yours) open in a separate tab within Firefox, IE, etc. Clicking a link takes you away from the site, and I end up having to navigate back to the page to continue reading comments, etc. Much more convenient if we could click one or two links to read later, while continuing the page or comment we’re on.

  48. Hulkster says:

    Really don’t see anything unbelievable or surprising at this. Look at the trillions of losses suffered by federal/state/municpal and gov’t guaranteed pension plans in connection with the stock market meltdown. The government has hopefully woken up and decided that stabilization money now is going to cut their losses by orders of magnitude in the future. I see guys like Shelby on TV and they just have no idea. You’ll see 75% inheritance taxes if the government doesn’t stop the bleeding and the self-rightcheous get to rain down their Depression on those ‘who deserve it’.

  49. batmando says:

    @ CPJ13

    “Clicking a link takes you away from the (TBP) site, …”

    Try right-clicking on the link to open link in a new tab.
    It works for me on FF 2.0.0.18

  50. kingtone says:

    a complacent public for sure. It’s not likely WE and everyone else out there in our fair land some feel some guilt over the excesses of the mortgage-mania, more likely that the pain hasn’t really hit everyone yet (some for sure, but they might get shot at if they march). THEN the tarring and feathering starts, which will likely have it’s own version of overshoot.

  51. constantnormal says:

    Can the USofA survive is Citi is wiped out?

    Yes. It might be ugly for a while, but YES.

    Can Citi survive if the USofA is wiped out?

    I don’t think so.

    It was an easy choice, to my way of thinking.
    Obviously, my thinking is not shared by the mental giants in the administration.

  52. DL says:

    The best way to rob a bank is to own one.

    A good way to rob the taxpayer also.

  53. constantnormal says:

    With the bailout of Citi, the auto companies gain increased leverage in the theater of public opinion to claim their “fair share” of the looting of America.

    This is looking more and more like bureaucratic warfare by the Bush administration, trying their best to drive the economy so deep into the ditch that it will be impossible to extract.

    Iceland got bailed out by the Europeans. Who will be bailing America out?

    Recognize that it will likely require amounts in the neighborhood of one-fourth-to-half the aggregate GDP of the planet, once you factor in bailing out the auto companies, the airlines, and a generous “stimulus package” for the sheeple.

    And if America CANNOT be bailed out, what then?

  54. Mannwich says:

    @constantnormal: We just make it official and become a wholly-owned subsidiary of the People’s Republic of China and/or Japan or both.

  55. DL says:

    Mannwich @ 11:09.

    “Does anyone else notice the blatant rank hypocrisy by CNBC when it comes to bailing out Wall Street…”

    There’s another point to be made here also. These guys on CNBC just LOVE the idea of forcing the taxpayers to bail out banks. At the same time, they’re always railing against those who want to raise taxes on the wealthiest 2%.

    I see a disconnect here.

  56. constantnormal says:

    @Mannwich: Do you really think they are big enough to manage that?

  57. constantnormal says:

    “We just make it official and become a wholly-owned subsidiary of the People’s Republic of China and/or Japan or both.”

    I could live with that — I drive a Japanese car and my computers are made in China (as is almost everything), and the Chinese have a very effective method of punishing corrupt/incompetent corporate leaders, that tends to have zero recidivism.

    I don’t think I would like their approach to personal liberties, however.

  58. babycondor says:

    What I see in these comments is that people are clinging to old ways of thinking…old definitions and strucutres, about capitalism, markets, economies, etc.

    It is all changing, as many of you have noted. We are witnessing a downfall, make no mistake. The tower is crumbling.

    You can resist and wring your hands…stockpile weapons and food if that’s the kind of world you want to create…or you can let go of your “precious” (Gollum’s archetype) and embrace the new thing being born.

    We none of us know what it will look like, or how we will fare, and this frightens us.

    It will not be like 1929. It will not be like anything we’ve seen before. This is a crisis, but it’s also an opportunity, as every crisis is.

  59. bcasey says:

    I agree with BabyCondor. New York is history, along with New Jersey, Delaware, and all the other financial hotspots. Those who advised Downsizing Outsourcing, OffShoring and other shortsighted schemes have come up against the wall of ‘there is no industry’ in this country to generate any wealth anymore, no wonder their bubbles burst! About the only thing we actually do make are McDonald’s Hamburgers, the rest we import. The bailout of the financial sector is only prolonging the agony. We all should learn to do more with less, not just the auto CEO’s. If we do manage to prop up the financial vultures, they may survive a few more decades until the ocean comes in and puts New York underwater. I will be thankful on that day.

  60. DL says:

    GDX up 39% in two trading sessions.

    What happens when we get a stock market rally that lasts an entire month?

  61. boyson says:

    At what point do taxpayers demand that the people responsible for creating this mess must pay their pound of flesh?

    The pound ( s ) of flesh that have been chopped off the stock price serves as payemnt, don’t you think? EJB .

  62. DL says:

    boyson @ 1:56

    A downpayment, maybe.

  63. bcasey says:

    We won’t be happy until we see the tops of the skyscrapers underwater and the I love NY T-shirts floating around.

  64. CPJ13 says:

    @batmando:

    Yep, that’s what I’ve been doing. I just figure it would be more convenient for everyone if it defaulted to opening in a new tab. You need two hands to perform that function on a macbook pro.

  65. Mannwich says:

    DL Says:

    November 24th, 2008 at 12:56 pm
    Mannwich @ 11:09.

    “Does anyone else notice the blatant rank hypocrisy by CNBC when it comes to bailing out Wall Street…”

    There’s another point to be made here also. These guys on CNBC just LOVE the idea of forcing the taxpayers to bail out banks. At the same time, they’re always railing against those who want to raise taxes on the wealthiest 2%.

    I see a disconnect here.

    @DL: I see the disconnect as well, as I’m sure does the new president-elect, which is why taxes are going to be raised at some point on this group one way or another. Probably not going to happen next year or even the year after but it will happen sometime in his first term.

  66. The Curmudgeon says:

    Babycondor…you’re dead on. This time is “different” but not the kind of different that the bullshit artists tried to sell you when peddling internet stocks or the housing market. This is the different that is, actually, different. This is a real contraction, not just an adjustment, one like no one under forty has ever seen.

    I’ll know we’ve hit bottom when talking-head financial shows and home-flipping shows no longer grace the airwaves–a side benefit to this contraction will hopefully be an end to the notion that anyone really knows what the hell drives markets in the near term. They don’t. Warren Buffett, supposedly the smartest financier on the planet, has lost about 30% lately w/ Berkshire Hathaway. If he doesn’t know, who does?

    For everyone that thinks Citi’s failure would have been catastrophic–remember this–insolvency doesn’t disappear because of government backing. It just transfers the losses to a new, larger entity (the US gov) that is presumably better able to absorb them. But the US gov is not infinite. It is funded by the US taxpayer. The question to ask is whether giving $306 billion to Citi enhances or impairs the welfare of the US taxpayer. Then ask, can we do this for every failing enterprise? Is the US taxpayer that rich? Is his back that strong? We’ll see.

    Deflation will soon turn to hyper-inflation. And that’s simply a mathematical exercise. The aggregate dollar supply should represent the value of the goods and services our economy produces. Keep printing them with abandon, and eventually, even with decreasing velocity, we’ll far exceed the amount necessary for a stable pricing signal. Oil’s up 5% today alone. When foreign governments are forced at the point of a nuclear-tipped warhead to accept dollars as payment for oil, then we’ll have pretty much bottomed out.

  67. The Curmudgeon says:

    Oops, make that nearly 10% increase on oil. Send lawyers, guns and money…

  68. Brooke says:

    Yes, bail them out. Let them keep their $400 mill deal with Met Stadium. They are naming it Citi Field. If they take the bailout out give it the proper name TAXPAYER STADIUM.

  69. jc says:

    What is the Treasury guaranteeing, a fanciful mark-to-market of $300B of CITIs worst assets when sales of these assets bring less than 10% (Iceland & Lehman)?

    How is this risk being valued by Treasury, FED & FDIC, ummm maybe about zero? Paulson didn’t want to go back to Congress to get authorization of the second $350B so he “guarantees” toxic assets at zero cost rather than purchase them to avoid oversight, hmmmm? Pretty clever.

    The values of the underlying mortgages and loans keep dropping so when CITI is forced to recognize new , lower marks after their year-end audit then treasury suddenly has another $50-100 billion liability after Paulson has left?

    I thought CITI would last a quarter before they came back for more TARPbucks but I was overly optimistic. This $300B is just the worst tranche of CITIs bad loans of course and with the economy tanking there’s no reason to believe they won’t want the US to continue picking up 90% of their bad debts, and they aren’t the only big bank in this situation so Paulson can continue to “guarantee” their liabilites at no cost til he & Bush leave town.

  70. jc says:

    From today’s NYT… The assets in question — described by the government as “loans and securities backed by residential real estate and commercial real estate, and their associated hedges” — must be valued at current market value before the guarantee kicks in, but the government and the bank have yet to agree on those values.

    Un freakin believable – they don’t even know the value of their guarantee, this is more like a MOU than a real contract.

    The current market value for illiquid assets, sweet. Is it under 10% like Iceland and Lehman or more based on what?

  71. icangels says:

    I’m just an average US citizen, struggling to survive…

    Maybe my experience with CitiFinancial will help congress get a better idea of how these people do business.

    I have a mortgage with CitiFinancial. It runs behind on a pretty regular basis. They just REFUSED my latest payment. Third time this office has done this over the duration of our loan with them. They sent my check back to me with the word REFUSED writtin across it in RED ink, along with a letter saying they will not accept my check.

    In each instance where this company has refused my payment, it’s made my account past due more than 60 days.

    Credit rating is already bad these days. Their refusal of my payments makes it APPEAR even worse.

    Though I might send their letter and a copy of the refused check to my congressman.