Citigroup Writedowns May Top $13.7 Billion

Bloomberg:

Citigroup Inc., the world's biggest bank, may have losses from asset-backed bonds of as much as $13.7 billion, roughly equal to the company's profit so far this year. The shares fell for a sixth straight day.

The bank may have to write down an additional $2.7 billion of subprime mortgage-backed and related securities, CreditSights Inc. said today. Citigroup said on Nov. 4 that securities it holds may have lost $11 billion of value, prompting rating companies to downgrade its credit and precipitating the ouster of Chief Executive Officer Charles O. ``Chuck'' Prince III.

Additional writedowns may balloon to $21.1 billion if off- balance-sheet units are included, according to analysts David Hendler, Richard Hoffman and Pri de Silva in New York. That compares with potential losses of $5.4 billion for Bank of America Corp. in Charlotte, North Carolina, the second-biggest U.S. bank, and $4.1 billion for New York-based JPMorgan Chase & Co., the third-biggest, CreditSights said.

Read the whole story: Bloomberg

Comments

[mrcontinental]

Helicopter Ben Bernanke is tasked with guiding a weak climber - the ever-expanding currency system - to the peak of Mt Economic Utopia. To the left is the chasm of hyperinflation and to the right the precipice of deflation, and the path narrows as it rises up to the distant summit.
On the lower sections of the mountain path it is wide enough to let our guides turn us round. But the closer we get to the summit the more everyone believes it is achievable. Mountaineers suffer the same problem. They call it "Summit fever" and it claims far more lives than bad luck ever did, by corrupting the powers of good judgement.
It takes a lot to turn one person away from a summit. Turning round a happy crowd is quite impossible. They would rather believe the optimism of the guides who talk of spectacular rates of ‘sustainable growth’. They prefer government statisticians who add mandated public sector expenditure into economic growth figures, and they listen to commentators who refer to ‘Goldilocks economies’ and ‘productivity miracles’. So they buy more sports utility vehicles on borrowed money and re-finance their houses.
Yet domestic economic activity has no real growth, and high imports cause huge trade deficits. Savings rates diminish, financial instrument yields evaporate, governments borrow and spend and call it ‘investment’, corporations report profits which have nothing to do with earned cash, financial trickery permeates all levels of society and credit is offered to an ever increasing set of less well qualified borrowers, whether sovereign states, companies or individuals.
The majority cannot see these signs for what they are. Only a few miserable realists look around and, seeing the dangers on both sides, turn back on their own and face the cheerful smiles of those who continue on up.
It’s a long lonely walk down and there’ll be no-one waiting at the bottom to cheer your safe return

[themodernleader]

I have read that the briliant Citigroup business genuises wrote down the subprime equities assuming a 50 percent loss. I sold property that was resold the same day at a 25 to 35 percent increase. The speculative broker pocketed the difference. I can assure the reader that the write down will be closer to 80 or 90 percent than to 50 percent. Citigroup, the Nation's largest bank will be bankrupted without the Fed attempting a bailout with our tax monies.
Any attempt to bail out the inflated loans that are facing default (with increased taxes, insurance and refinancing) will do nothing more than further erode the credibility of our currency. The only way out is to take the fall and pick ourselves back up as a nation with wiser leadership.

[olephart]

Who would have thought that using debt as an asset would have a downside? I love the terminology, subprime loan. "It's almost as good as a prime loan except it was made to people with a credit score of 471 instead of 800!" Month after month of loan resets on top of the existing defaults will insure a steady diet of foreclosures, house price markdowns and pressure on an already falling market. Nobody has even mentioned the Alt A loans. These are the next rung up on the credit ladder. These are the loans made to people with marginal credit. The barely qualifies on a good day home buyer. Nobody has talked about the prime borrowers who are seeing house prices fall all around them. Their "equity" going down the drain. Many have taken their "equity " out by refinancing or a second lien. What happens when millions of prime loans go upside down? Government debt, continuing deficits, a falling dollar, rising inflation, falling home prices, stagnant wages, household debt at record levels, job losses and a record number of foreclosures. Who would have thought that buying things you don't need with money you don't have, borrowing money to finance tax cuts and paying for a war with off balance sheet supplemental appropriations would have negative consequences? We're just seeing the beginnings of the write downs, 13 billion is chump change.

[Justinpassing]

I'd also like to take this opportunity to officially declare that Allen Greenspan is the Paraclete of MAMMON*ography.

[Justinpassing]

The really BIG story in market news today is that the monolines are officially in total melt down. The monolines insure banks against defaults on all those CDO's and other derivitives plays and is a TRILLION DOLLAR nightmare. This is a direct link to the take-down of even the municipal bond sector. This is a breach of 3rd line defenses and the best (Worst) indicator yet of the magnitude of the US AND GLOBAL economic melt down.

[craneman]

how long will it be before they ask the republican administration to bail them out?

[mrcontinental]

This is far from over.

Who the hell do they think they are fooling with the slow trickle of info.