The New Bernanke-Bair-Paulson Insurance Company

After first trying in vain to become toxic-asset managers and, next, non-voting equity investors in shaky banks, the peripatetic trio composed of the Federal Reserve chairman, Ben S. Bernanke; the chairwoman of the Federal Deposit Insurance Corporation, Sheila C. Bair; and the Treasury secretary Henry M. Paulson Jr. decided last weekend to reinvent itself as an insurance company -- hereafter the BBP Trio Insurance Inc.

Here are the terms of the Citigroup insurance plan: the bank has on its balance sheet about $2 trillion in assets of which $306 billion, mainly related to real estate, are of uncertain value. In the event that those assets turn out to be worth less than $306 billion, American taxpayers will cover -- that is, reimburse -- Citigroup for some losses. But before taxpayers start reimbursing Citigroup for anything, up to $29 billion in losses will be absorbed by Citigroup. (This is the deductible.) After the $29 billion is reached, taxpayers will absorb 90 percent of any additional losses, and Citigroup will absorb 10 percent (this being the co-insurance).

As in a health insurance policy, there is a maximum amount of potential losses that the taxpayer will bear, but that level has not been determined. According to the "Summary of Terms" published by the United States Treasury, that maximum exposure will be "based on a valuation [of the $306 billion book value of assets] to be agreed on between institution [i.e., Citigroup] and USG [the United States government]."

Read the whole story here.

Comments

[larry278]

Clever pitch to say the bailout is like insurance. Since the public is stuck with paying the benefits as those who invest in Lloyds, we must expect the dedutables(sp?) be increased from the overly generous package Citi just got. Citi & other financial entities brought the meltdown upon thelveselves as the 3 pack a day smokers bring COPD, emphysema & death upon themselves. Citi isn't worthy of the so called insurance benefits. Citi isn't the hard working coal miner who gets black lung after 25 years & spends the rest of his live gasping for breath till he dies in pain & short of breath. Citi's executives fully knew of the risks &, unlike the coal miners, produced nothing save undue risk & uncontrollable debt. Fire the execs; bar them from employment in any endevor related to finance, make the enterprise seeking & accepting a bail out pay an adequate penalty for their self- inflicted pain induced by their own greed & stupidity. That may encourage responsible behavior in the financial community.

[PhilipTaylor]

Why is BAIR, who has tried Honestly to help Home Owners, associated herself with these two BANK FEEDERS who have given $7.7 Trillion to the VERY BANKSTERS who caused this CRISIS with their PONZI Scheme?

We must not give PAULSON another DIME for his dishonest Efforts! Controlling Bernake is a more difficult matter!

BAIR stay away from these guys or you will be labeled!

[pearl89]

I don't trust Paulson or Bernanke. They are part of the culture of greed and it's the only way they know how to fix things. I know I'm economically illiterate, but I don't understand this whole scheme. It just seems to me that they expect the taxpayers to pay,pay,pay while the big corps do nothing except collect big pay outs from us. How much debt are we suppose to incur in order to save these ill run companies? Where are the guidelines dictating to these companies on how they money should be spent? There should be more accountability on where this money is going.

[bygollymissmolly]

The only one of that three that is really concerned about main street is Sheila Bair. As the head of the FDIC she has been trying desperately to get the Bush Crime Family to agree to reworking mortgages and guaranteeing losses if the banks agree to lower interest rates and re-work their mortgages. Here's the story:

http://www.msnbc.msn.com/id/27482346/

I still can help but think that the mortgage industry has purposely caused this crash. They didn't have to throw those mortgages into foreclosure by increasing the teaser rates of 4.5% to 10, 15 and sometimes 20%. It's no wonder the homeowners can no longer afford to pay on their mortgages. If the government had stepped in and mandated that these companies could not raise the interest rates beyond the current rate plus maybe 1%. That would have stopped most of the foreclosures.

[bygollymissmolly]

There is one thing missing from this witches brew. That is the requirement that CitiGroup start lending money again. It is my understanding that none of the banks/financial institutions that have received these gifts from the taxpayer are once again lending money. They are simply sitting on their ill-gotten gains.

[Woggles]

Ok look...whoever stole the $578,914,276,681,292,844.16...please put it back on the table, no questions asked...you won't get in trouble.

[CaptD]

We know what the potential payments are but what are the potential incomes?

In short, what are the American people getting from this deal; a percentage of Citi's potential profit or what?

Think how many home owners would like to get mortgage insurance in the same ratio!

[gorgol]

If they back off and wait for Obama...and Obama pulls us out of this mess...their reputations will be ruined.
And we know from ANYONE connected to the Bush regime...reputation comes before Country...that's why I'm afraid what Bush will do before he leaves.

[Shaddup]

Insurance from a liability?

[ebanks84]

It seems to me these creeps are gonna find some way to keep their fingers in America's financial till some way, form, or fashion. Why can't they just leave everything alone and let Obama handle it? Who wants them around anyway? I don't. Paulson makes me ill just looking at him. Bernanke and Bair looks like somebody rained on their parade also. Make them all go away!

[bygollymissmolly]

Because they have to steal every last penny they can before they head for the hills. I truly believe that this financial crash was intentional and for the purpose of milking the taxpayer for every penny they can get from us. So far the fat cat financial institutions are the only ones who have benefited from any bailout.