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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