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Citi’s So Nice I Bought It Twice (a Tin Foil Hat production)

Alright, let’s see if I got this straight:

  • Less than 4 weeks ago Citi was purchasing Wachovia in a deal brokered by the FDIC.
  • Less than 3 weeks ago the Fed injected $25 billion into Citi
  • Less than 1 week ago Citi’s shares tumbled
  • Yesterday the Fed injected ANOTHER $20 billion into Citi

Am I forgetting anything?  Oh yeah:

  • Based on share price, Citi is now worth $20 billion… which means we (the taxpayers) have bought her twice!

When Citi was buying Wachovia waaaaaaay back in October, it was apparently strong enough to handle the $42 billion in losses it agreed to take on in exchange for the Fed covering the other $270 billion that Wachovia was going to generate in bad loans.  But now we discover that they actually needed us to purchase them… TWICE, and we’re still unsure if they’ll survive.

(For a clearer picture of which lenders had these bad loans and would fail, read The Mortgage Dance from July of 2008 and click on the “accounting debacle” link which was originally delivered in a speech in August of 2007!  Or you can read about Countrywide beginning its fall back in May of 2007.  My point is that much of this seems obvious now and was actually visible on the horizon quite a while ago.  But the Fed keeps up its Animal House impression, telling us to “remain calm… all is well.”  The possibility of a conspiracy grows so large that now i don’t even leave the house without my Tin Foil Hat.)

I have to wonder if there was more going on in that initial Wachovia deal.  Was Citi getting a cash infusion of some type?  One of the influential directors at Citi is Robert Rubin – the former secretary of the Treasury.  I’m not sure I understand how he didn’t see that Citi was only three weeks away from failing.  Although I can certainly understand how he might have an inside ear at the Treasury.  Was the Wachovia deal a way to support Citi without making a public scene?  That would explain the ensuing public scene (the technical term in economics is hissy-fit) that Citi AND the Fed threw when Wells Fargo came along and said they would buy Wachovia without any help from the government.  The Chairman of the FDIC would have none of it.  She said they still backed the Citi plan!!  Citi itself stomped its feet to the tune of a $60 billion lawsuit.  Sixty billion dollars?  Is that what they were looking for all along?  How in the world did the FDIC stand there with a straight face and say they still backed Citi when Wells was offering 7 times as much with no taxpayer risk?  How in the world did Citi plan to show that losing Wachovia to Wells Fargo cost them $60 billion?  Maybe they all believed what they were saying… Maybe they all forgot their Wheaties that week… Or maybe there was more going on than we were lead to believe.

I’m not sayin’… I’m just sayin’…

Related posts:
  • CIT + FED = BK
  • The Paulson Clarification (a Tin Foil Hat production)
  • Stress Tests and Wells Fargo: A Tin Foil Hat Production

  • 12 comments

    12 Comments so far

    1. Thomas Johnson November 24th, 2008 9:56 pm

      Route your internet connection through the Ukraine so they can’t get to you by finding your computer.

      They really do live in your computer.

      Be careful. They are in here….

    2. Vance Shutes November 25th, 2008 3:41 am

      Sean,

      Let’s see. $300 Billion for Citi, and they don’t have to prove a thing about how they’ll change their ways. But there is no way the Big Three (Ford, GM, Chrysler) will get a penny until they prove they are worthy? Or that they’ll kowtow to DC demands?

      There’s something rotten in DC (Denmark), and the odor covers the country. Especially so here in Michigan.

      The DC crew is only interested in saving their own hides, and protecting their buddies. Apparently, the Big Three didn’t kiss enough butt in DC to get a penny. Meanwhile, the wall-streeters are laughing all the way to (their own) bank, and living it up on the taxpayers dole.

      The sooner the Yahoos in DC get the heck outs Dodge (to quote our friend, the BawldGuy), the better. And good (no, make that really BAD) riddance!

      Am I pissed? Da** straight!

    3. Broker Bryant November 25th, 2008 5:20 am

      Sean, This stuff is all mind blowing. You can be sure there is a whole bunch that we are not privy to. Bottom line is that this bail out was destined to fail. Foreclosures and losses are increasing and will continue to do so for several years. There is NO way to stop them.

    4. Tom Vanderwell November 25th, 2008 6:16 am

      Sean,

      A couple of things:

      1. I’ve read more than one report that says that the reason the government tried to get the Wachovia deal going with Citibank was because they could then bailout Citibank with out actually having to say that the largest bank in the country was going south on us.

      2. There was and is a LOT more going on than what we know. The only way that the government would that quickly offer the sweetheart of a deal that Citi got is because the government knows more than we do. Let’s look at what the government said:

      Here, we’ll give you $20 Billion.

      You take the first $29 Billion in losses (keep in mind, they got $25 Billion before, so they are still $16 Billion ahead).

      After the first $29 Billion (which should take until maybe next Wednesday?) then you and I are going to take the next oh, $306,000,000,000 in losses. After that, well, we’ll renegotiate?

      Do you think you and I can get that type of a bailout?

      Tom

    5. Cheryl Johnson November 25th, 2008 6:57 am

      Here’s something I can’t remember, and I can’t seem to find the answer online.

      What, exactly is the status of the $60 billion lawsuit right now? Was it dismissed? Settled?

    6. J Boyer Morristown NJ November 25th, 2008 7:46 am

      This kind of thing is just disgusting. I think that all of this should have to be made public if they are going to use public money. All I can say is Go Wells Fargo, at least your still a privately owned bank operating in a capitalist manor.

    7. Robert Kerr November 25th, 2008 9:19 am

      re: Citi

      $45B in cash and a $300B guarantee of their bad paper.

      And Citi’s executives have not yet decided if they will forego bonuses this year.

      This is obscene.

    8. dirty blue widgets November 25th, 2008 11:15 am

      I really believe we are only really half way through this debacle and there is a lot more “meltdown” to come. The fact that the banks, who received bailout money in order to relieve the credit crunch but have actually hoarded it to offset debts that are about to show up, shows there is much to this than we have been told.

    9. Jim Gatos November 25th, 2008 11:22 am

      I say we get Russell Shaw on this case. Isn’t it amazing what a job he’s doing with realtor.com’s bailout plan?

      Jim

    10. Greg Swann November 25th, 2008 1:20 pm

      > Isn’t it amazing what a job he’s doing with realtor.com’s bailout plan?

      What means this? What have I missed? Say on, Jim.

    11. Doug Quance November 25th, 2008 6:34 pm

      I sure am glad I’m in real estate.

      It seems like everyone else needs – and is getting – a bailout.

      Good thing we’re not affected by all this calamity going on.

      :roll:

    12. [...] solution at best but I suppose there is plenty of pressure to throw Main Street a bone after the continued blunders of the Wall Street [...]