Citi Group Eyes Options, Including Merger (Reuters)
After the losses over the last week the Citi board is looking for options, and futures are up on expectations. I don't know what there's going to be for them on the street, though, outside of liquidation and absorption into other firms.
To the point of liquidation, MS has already weighed in with a resounding "no", while JP Morgan isn't saying much - but I doubt that after the WaMu integration and writedowns they're going to have a lot of capital reserve to work with. Barclays doesn't have much on the table, either - and BofA is at capacity. I think if we're going to see Citi unwind, it's going to have to be slow and methodical: I'm sure someone will pick up the consumer deposits, but the rest of the company is probably looking at much less pleasant times.
Harkin Moves Forward With CDS Exchanges (WSJ)
"Senate Agriculture Committee Chairman Tom Harkin plans to introduce a bill Thursday that would force all over-the-counter derivatives, including credit-default swaps, onto regulated futures exchanges."
Not an unusual or ill-timed move; ICE and the CME have both been pushing forward with their plans for a CDS exchange. The exchange will allow for better regulation of the instrument, which few people actually take the time to understand (though of recent, everyone seems to be talking about them).
BNP IB Unit To Face Bonus Cuts (Bloomberg)
"Europe's third- biggest bank, may cut bonuses by more than 70 percent at its corporate and investment bank after profit plunged in the first three quarters of the year."
It's only a matter of time, BNP, before Cuomo finds a way to annoy the shit out of you, too.
All US Financials To Be Nationalized (CNBC)
Eclectica Asset Management CIO Hugh Hendry is under the impression that all or at the very least the vast majority of US Financial institutions will be under the thumb of the Senate by the end of the year. While the argument isn't fully detailed, I imagine it's a variant of the tried and true "too big to fail".
Paulson Questions Wall St Pay (WSJ via DJNW)
"Mr. Paulson, who had a lucrative career on Wall Street, also questioned compensation practices of the financial-services industry, saying policymakers need to ensure those practices don't "encourage unsafe and unsound risk-taking or reward failure.""
"And he took aim at the practice of slicing and dicing loans and packaging them for sale to investors, saying there needs to be a "wholesale review" of such securitization."
Usually casting stones is a diversionary tactic, the idea being that if you attack something that everyone dislikes, you'll draw the attention off of yourself long enough that maybe no one will notice how monumentally you fu*#ed things up. I can only imagine that's what Paulson's trying to accomplish, as there's absolutely jack shit wrong with tranching. Let's review the basics: it distributes default risk across a pool, and it allows for the segmentation of risk classes among risk seekers. Tranching had absolutely nothing to do with the current credit crunch; that's a myth that needs to get dispelled quickly.
If you're going to point fingers, it would be wise to start with the mental powerhouses that are the Regional banks. The Regionals, for those of you late to the game, issued loans to speculative contractors, and then facilitated the issuing of loans to cover the original loans, increasing their bottom line. This is only a problem when you consider that they knew that the second round of loans could be packaged and sold - meaning they didn't face any of the default risk - and the first round couldn't, which in turn means it was in their interest to make risky loans to cover their in-house loans. America got screwed by the bank at the street corner, not the one on Broad Street.
--William Richards
Posted by guest , Nov 21, 2008 8:22AM
C needs to merge with GM to survive.
Posted by guest , Nov 21, 2008 8:27AM
Yep. All Paulson's fault. He could have saved us all, but didn't because he's lining the coffers of the Audobon society. He and his cronies are trying their best to drive America into the ground so that the water fowl will once again rule Manhattan island. Sec Tres is such an easy job right now, can't believe he's screwing up...Too bad Billy from Shamwow wasn't in charge.
Posted by guest , Nov 21, 2008 8:31AM
Citi's board = setting new and lower standards every day.
Instead of criticizing Viki, people should focus on the board, which is an example corporate mismanagement at its worst. It is really hard to believe that this board has not been overhauled since Citi's troubles began in earnest. Replacing Vik at this point, even if you believe is warranted, which I don't, will only have a detrimental effect. There is no one willing or able to replace him, and the problems are really at the board level.
Posted by guest , Nov 21, 2008 8:32AM
Yes. I think Billy from Sham-Wow could have managed this crisis a lot better than Paulson.
Posted by guest , Nov 21, 2008 8:33AM
Damn Vik, what's up with the double chin? Been hitting the donuts little hard, huh?
Posted by guest , Nov 21, 2008 8:36AM
I'm surprised they have raped, sorry I meant asked the US taxpayer for "assistance." The Federal Reserve is a criminaly syndicate made up of central bankers who's time has to an end. The average American needs to stand up and do something before we begin a 2nd great depression while they snap up all the assets on the cheap. Why do we need a 3rd party such as the Federal Reserve to steal from the US Treasury which in turn steals from the US taxpayer? Enough of the scams.
Posted by guest , Nov 21, 2008 8:36AM
Citibank needs to merge with the Worldbank in order to survive
Posted by guest , Nov 21, 2008 8:40AM
Pandit sucks big time! Ran a shit HF into the ground too. About the same as Chuck Prince, both are do-nothing politicians. Rubin sucks also. None of them know how to run a commercial bank.
Posted by guest , Nov 21, 2008 8:40AM
oh bitches this Friday could become uglier than a wideclopse with late stage syphilis..
Posted by guest , Nov 21, 2008 8:41AM
The bank at the street corner did all this? Get real, son.
It took a village, which is why the entire village is now burning to the ground.
Posted by guest , Nov 21, 2008 8:42AM
Who is going to want to hold C through the weekend?
Posted by guest , Nov 21, 2008 8:43AM
@10
Nope, all Paulson's fault. Everything was fine until Bush had to unleash his dogs.
Posted by guest , Nov 21, 2008 8:47AM
Doesn't SunCiti sound like a happy place...
Posted by guest , Nov 21, 2008 8:52AM
@12:
Just one counter-example: What about all the phony home appraisals that got thrown into incomplete mortgage application files throughout the country? As in, pull up to the curb and ask the realtor/broker,"What is your target value?"
No argument that Paulson earned his (huge)share of ignominy -- in fact you could probably roughly apportion blame in keeping with how much money each player took off the table during the blackout at the casino.
But this ass-bleeding is far too much for one man to have administered alone...
Posted by guest , Nov 21, 2008 8:52AM
@10
I'm with Richards on this one.
-phobos.
Posted by guest , Nov 21, 2008 8:58AM
The problem with tranching is that the origniators of the loans aren't retaining enough of the risk to have an incentive to monitor ongoing credit quality. On top of that the unrealistic ratings give the tranche holders a false sense of security.
So I agree with Paulson. There needs to be a wholesale review of the process.
Posted by guest , Nov 21, 2008 8:58AM
As long as we're deflecting blame to the less prestigious (regional banks), we might as well drag the rating agencies in. Diversification, my a*s.
Posted by guest , Nov 21, 2008 9:15AM
@WilliamRichards...
TGFD must take issue with your statement:
"There's absolutely jack shit wrong with tranching. Let's review the basics: it distributes default risk across a pool, and it allows for the segmentation of risk classes among risk seekers. Tranching had absolutely nothing to do with the current credit crunch; that's a myth that needs to get dispelled quickly."
If tranching was so good, and since you claim it had nothing to do with the crunch, how come nobody is able to figure out who even owns many of those failed/failing mortgages, many of which are individually tranched, and therefore unable to even be considered for refinancing?
I guess the genius types who did the tranching didn't anticipate the possibility of mortgages failing.
The Guy from Delaware
Posted by guest , Nov 21, 2008 9:18AM
TGFD:
While I agree with some of what you wrote, the tranching allowed for a small %-age of failures. What the "genius types" didn't anticipate was massive real estate meltdown nationwide.
Posted by guest , Nov 21, 2008 9:18AM
Lets examine the situation a little more closely than pointing fingers. The Systemic problem, almost by definition, cannot simply be the fault of regional banks, the current regime, Paulson, Fannie, congress, rating agencies, the street, Greenspan, et al. Though many of these players passed key moments in which their ability to lessen the problem was lost, no one can singly be blamed. A History: Regional banks were incentivized to make bad loans, which were shipped to Fannie creating a source for main street banks to offload risk, and in turn Fannie offloaded risk to Wall Street who further repackaged that risk to sell to institutionals. Fannie was mandated by congress to make available and honor loans to low income borrowers. After the practice became widespread enough, Fannie was no longer necessary as it was a credible threat for regional banks to unload loans directly to wall street, who would repackage them with the faulty modeling of rating agencies in mind. At the outset of all of this Greenspan policies created a deregulated lending environment with historically low interest to facilitate the problem. Bernanke was too green when taking office to adequately address the issue and Paulson is just plain ineffective. Systemic.
Posted by guest , Nov 21, 2008 9:23AM
Is it worth investing at 5 bucks a share?
+++
Posted by guest , Nov 21, 2008 9:24AM
Paulson ineffective?
Maybe he is trying to bail out his friends for the last few months. If that is the case then thats why he has thrown 100's of billions at his banker friends and never considered the auto industry worth saving.
He is very effective just for his friends.
Paulson knows exactly what he is doing. How could he not, the man has 500 million in Treasury bonds.
Posted by guest , Nov 21, 2008 9:33AM
@20 is absolutely correct, with one addition to the definition of Systemic. A ton of corruption large and small was thrown in, hence the 'blackout at the casino' where everyone grabbed what chips they could.
Posted by guest , Nov 21, 2008 9:38AM
"it would be wise to start with the mental powerhouses that are the Regional banks"
how is what these 'mental powerhouses' did substantially different from what Goldman did? both saw a way to profit and simultaneously off-load risk to the pigeons at the poker table. why does GS get credit for evil brilliance and not the crafty guys at the regionals slower? this a NY bias?
Posted by guest , Nov 21, 2008 9:55AM
@TGFD
That's like blaming the car for a drunk driving accident. The vehicle didn't have anything to do with the mortgages failing.
The PMs knew what they were buying (as far as tranched risk), no one is dumb here, but we didn't know that the default rate could reach so high. The rating companies screwed us, but the facilitation of origination on these mortgages is almost criminal.
The rest of the system failed because the regionals didn't inform us of the risk they exposed us to.
Posted by Anal_yst , Nov 21, 2008 10:02AM
@24/William
I was speaking with a friend who sat on the CDO desk of one of the banks a while back asking wtf happened, and turned out, alot of the otherwise very smart guys structuring these products misjudged basic human nature and greed.
For example (and with the benefit of hindsight this is virtually unbelievable), they never thought that with no-doc, stated income loans there would be the level of fraud and deceipt that we actually witnessed. The model can be flawless, but you put garbage (assumptions) in, you're gonna get garbage out.
Posted by guest , Nov 21, 2008 10:15AM
iwa jima argument,
it was a comp issue, pure and simple, someone else's dollars, hot potato, pay my bonus, fuck off.
tranching, blame game, whatevs, the system is burning, we'll get a better one, maybe barter system.
citi sleeping with the fishes.
-retail
Posted by guest , Nov 21, 2008 10:37AM
@27 is right. Compensation drives behavior. And with no checks and balances, the innocent get hurt.
Posted by guest , Nov 21, 2008 10:59AM
Sachs and the Citi
or
Group Sachs
?
Posted by guest , Nov 21, 2008 11:08AM
Please let it be that Suntrust emerges as a buyer or bidder for C. Seeing those db's (not dealbreakers) answer to some good old boys in Atlanta would be just about perfect. [Its actually not that far fetched and illogical actually, they would be a good counter balance to BofA].
-C
Posted by guest , Nov 21, 2008 11:17AM
Sachs and the Citi
or
Group Sachs
?
Posted by guest , Nov 21, 2008 11:27AM
Circuit Citi
Posted by guest , Nov 21, 2008 1:01PM
Everyone here is angry at Paulson because he didn't miracuously save everyone in the financial industry although nobody would be able to do that.
You keep saying he is corrupt because he didn't have to pay taxes on the stocks he sold when he left GS but that policy has been in place for years - Paulson didn't tell Bush "I will only accept the job if you change the policy so I don't have to pay taxes."He was following policies already in place.
Before LB failed, almost everyone said that Paulson should not have give them a bailout with money from the government - he received a letter from members of congress a few days before telling him that he should not bailout another bank and reporters covering the financial crisis said the same thing.
Everyone though after BS the economy would recover. Then after AIG they thought the economy would recover. Then after Fannie and Freddie they thought the economy would recover. If LB had been saved people would say the economy would recover. The economy wouldn't have recovered - maybe it wouldn't have been as bad if LB had been saved but the economy still would have been bad.