Citigroup as the "Grim Reaper"
Brava Citigroup! From a broken institution you talked your compliant Wall Street buddies operating out of Washington to save your behind. Getting the Federal Deposit Insurance Corporation to provide protection against potentially debilitating losses from over $300 billion in toxic loans and securities which will now remain on Citigroup balance sheets as prime assets. Further the Federal Reserve stands ready to backup other residual risks in Citigroup's asset pool of non recourse loans. And in addition the Treasury will be investing $20 billion in Citigroup from the TARP. Understand all of this? Just in case you don't, the bottom line is that our government (read: taxpayers) put $300 to $400 billion on the line without which Citigroup would have in all probability been "bye-bye".
Chastened and thankful? Give us a break. Charlie Gasparino in a "Citi's Gossip Game" segment on CNBC yesterday reported that their Chief Finanacial Officer Gary Crittenden has been buttonholing anyone who would listen, bad mouthing Citigroups competitors such as Bank of America and JP Morgan Chase in order to boost Citigroup shares by putting down Citigroup's competition. Is that why we needed to save Citigroup?
And putting down JP Morgan Chase? An institution that has responded to the TARP assistance by announcing a policy that it will work with 400,000 homeowners to modify $70 billion in mortgages and loans, loans that have many homeowners scrambling to make payments they can no longer afford. Further it will stop foreclosures even in the most extreme cases for 90 days and has hired 300 mortgage counselors to help distressed homeowners. Speak of an example of civic responsibility.
What has Citigroup done in contrast? The Wall Street Journal reported on Friday that Citigroup is the lone holdout in a bank consortium comprised of Bank of America, Deutsche Bank, Eurohypo, Goldman Sachs and Wachovia who have all agreed to a nine month extension for debt laden General Growth Properties. GGP is the country's second largest mall operator with over 200 malls in communities around the nation and with tens of thousands of jobs both directly and indirectly that could be impacted. Citigroup's position would trigger a default in turn triggering cross defaults on other General Growth debt forcing the company to file for bankruptcy. A step that would not only effect General Growth, its employees and the communities wherein it operates, but would exacerbate, in a dramatically negative way, the commercial real estate market throughout the country. A Reuters article warns "Results of the negotiations [with General Growth Properties] are being closely watched in the $750 billion commercial mortgage backed securities market."
In an earlier post, I ended by paraphrasing Lenin, "Wall Street will sell us the rope to hang American Capitalism."
And in Citigroup we have created the perfect "Grim Reaper".
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With all these happenings Citi Group is just hastening anarchy, someone better get wise and forgive main street her sins of consumption, and get to the heart of it all. Usury in interest rates, for the average American, via the sacred cow, the credit card debacale. All the trouble started there, and in the first depression, too bad the greedy played around for so long until we went belly up. The guilt of the financials is credit cards. Deregulated for greed, and global expansion, we get the horrendous task of picking up the small pieces. Too bad, a very sorry state of affairs. Only the wisdom of Solomon can turn back the tide.
Citigroup gets to stick it to Consumers 2 X now - they get Billions of Taxpayer dollars - and they raise their credit card interest rates outrageously high - so they can make 2 X the money off of us - and keep us in debt forever.
I wish I didn't have cc debt but thanks to the Banks who tanked the economy - I am unemployed and still have to pay bills and medical expenses.
So I really hope to see Citigroup CEOs and Board Members bankrupted and sent to Jail.
Dear God, I don't know why I keep reading this stuff. I am soooo freakin stressed out over all the greed and corruption and keep wondering when will we have had enough.
To quote Derrick Jensen, an environmental activist, "Give me threshold at which you'll finally call this an apocalypse. Give me a threshold, more importantly, at which you'll finally fight back."
What will it take for people to defend that which is necessary for their survival?
what wasn't mentioned was that any bank with their fingers in the derivatives jar is very likely bankrupt. Political solution is to put the derivatives death star into receivership and sort out bad from good. What they've forked out to insolvent banks so far would have likely paid for all the subprime, alt-a, etc loans....its a systemic crisis.....good thing bush fired the director of the Office of Federal Housing Enterprise Oversight in 2004 for issuing a warning.
Raymond, Citigroup owns debt that is below the secured creditors. General Growth Properties has BILLIONS of debt coming due in 2009 and 2010. Unsecured General Growth Property debt is trading at around 10 cents.
If you were long debt that was trading at 10 cents on the dollar and you held the cards to possibly gain security to help your recovery, wouldn't you hold out for security? Not a lot of downside but plenty of upside.
General Growth Properties is no saint. They took advantage of the cheap credit punchbowl and levered up on a massive acquisition spree.They are the villain. Not Citi.
You are absolutely correct, in this instance both the borrower and lender screwed up, the lender by overestimating the security of the debt and the borrower by buying at the wrong time...These were both educated and sophisticated and experienced investors...
What about the 50% of the people whose IQs are less than 100, what are we going to do about that? Some of them made poor decisions, surprise.... Well my Japanese friend is telling me that in Japan there is growing elderly crime, they commit crime so they can go to jail, which is better than being homeless..Is that what we want to happen here?
Raymond, Citigroup owns debt that is junior to BILLIONS of secured debt. Citi's debt is trading for around 10 cents on the dollar.
Citi is hoping by not playing ball, they can force the secured creditors to give them security. If you were long hundreds of millions of debt trading for pennies on the dollar and you had the opportunity to try to gain security, wouldn't you also try play your hand? Your downside is only a dime. Your upside is a decent recovery. Citigroup is doing what any rational entity would do because General Growth has BILLIONS of debt coming due in 2009 and 2010. This is not the end of General Growth's woes.
In the long run, other than OBAMANOMICS I do not see how this company does not default on its debt.
General Growth got too greedy at the cheap credit punch bowl and borrowed too much money. They deserve to fail. It is moral hazard if mismanaged companies can succeed. It was built on the 2 biggest sins of the Paulson Era: cheap credit and leverage.
General Growth Properties is the villain here, not Citi. And I aint no fan of Citi.
Citibank must own Sears. Because they sent me a letter saying that my Sears account is frozen at the amount I owe. (1,200) , not because I don't pay on time or any thing, but because they evaluated my total debt and decided this was the limit I could afford. So basically, I cannot use the card. Now, I don't really use it much anyway, but now I understand the meaning to consumers of "credit freeze."
"Hammering the Competition" is possible in the DARK without INFORMATION!
Government Accouting Office, GAO, is logical Agency to determine condition of Bank/AIG OWNED Derivatives/instruments. Currently, BANKS' Instruments are NOT Identified and no market values assigned, yet Paulson/Kashkari throw Billions at BANKS.
BANKS are unwilling to write-down assets so GAO must find Facts for proper TARP ALLOCATIONS and Instrument Adjustments.
TARP is literally throwing money without knowledge of BANKS' True Market Value of their Instruments.
Fund GAO, perhaps $250 million to start, to computerize all Banks' Instruments, the Bank holding instrument, instruments' underlying assets, underlying market value, and other important facts into a single database. Many Banks will have computerized information which can be captured easily while others may require more work.
Not "ROCKET SCIENCE" and necessary to bring BANKS into FOCUS to focus Future TARP funds.
Powerful Side Effects:
1. Size of problem - estimated 1 in 5 homes face foreclosure
2. Bank write-downs needed
3. How much of lost asset value due to depreciation of underlying asset versus excessive fees charged that went to Banks' bottom line/executives
4. Understand need for regulations
5. Inform Congress/Americans the extent of problems.
GAO must require all Banks, within two weeks, to provide GAO defined format on instrument data on media GAO defines (eg. memory stick). Banks refusing will receive NO BAILOUTS and will receive GAO investigation.
This is fully justified within TARP rules as Oversight!
Doesn't Citicorp blow up at least once a decade? Didn't the Saudis bail them out last time?
Citigroup just bought the Pasadena Rose Bowl and we will all get to see their big logo on the field at the upcoming Rose Bowl.
Good to know they're spending wisely :(
If I remember correctly Citigroup stank like a barrel of fish heads long before the collapse. So none of this is really surprising. Dead fish rarely start to swim again.
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