Panicked Citigroup Discusses New Bailout With Feds
As of late Friday evening, no decisions have been made. Options under discussion include:
- Throwing Vikram Pandit over the side. Won't help. It's too late for a management change to save shareholders.
- Selling all or parts of the company. To whom? When? By Monday?
- Arranging a government assisted merger with another company. Which company? When?
- Having the government make an announcement of support. Irrelevant. Everyone knows the goverment won't let Citi go bankrupt. It's just a question of how they bail it out.
- Having the government provide a new financial lifeline. Inevitable. Probably won't save shareholders.
- Publishing full page ads in major newspapers telling public to be calm, all is well. This is preposterous. Can they really be considering this? Yes. In fact they're actually doing it.
- Treasury considering hitting up Congress for the second half of the $700 billion TARP. Given the refusal to send the auto industry one thin dime, this probably won't go over well.
- Bringing back the uptick rule. Fine. Whatever. Won't help. Shortsellers aren't the problem here.
Sorkin:
After a board meeting early Friday morning, Citigroup’s management and some board members held several calls with Henry M. Paulson, the Treasury secretary, and with the head of the Federal Reserve Bank of New York, Timothy F. Geithner, who hours later emerged as President-elect Barack Obama’s choice to be Treasury secretary.
As Citigroup’s stock sank, falling 94 cents to $3.77, the Federal Reserve was carefully monitoring how much money corporations and other customers were withdrawing from the bank, people involved in the discussions said. The Fed was trying to ascertain whether the tumult in the stock market could escalate into something worse.
So far, however, these people said, most customers and clients remained committed to Citigroup.
Translation: Some customers and clients are running for this hills. More will decide to do so over the weekend.
On Sunday, Citigroup plans to run full page advertisements in major metropolitan newspapers that acknowledge “our financial markets have been tested in unprecedented ways,” but arguing that it has the diversity and experience to pull through. In a nod to the company’s slogan, the ad concludes: “That’s why now, more than ever, you can feel confident that Citi never sleeps.”
Absurd. Meanwhille, within Citigroup, some executives are reportedly blaming the government. If only the Feds hadn't allowed Wells Fargo to steal Wachovia out from under them none of this would have happened.
(Apparently a few folks other than me worried about it, too)
What's even more funny is that this site just regurgitates CNBC's news. They have no inside contacts because Henry no longer has clout.
Once again he's using scare tactics. He's probably short C or has put options. He claims he bought more shares.
Turn to CNBC, subscribe to the Wall Street Journal, etc. but don't give this guy the ad impressions that he needs to keep this ridiculous site alive.
Don't worry Brian, Mr. Blodget has to live with himself. One his kids google his name, they will only see a man who defrauded the common investor and cost them millions.
You can read all about Henry here:
http://en.wikipedia.org/wiki/Henry_Blodget
Maybe Citi and its customers and lenders are counting on an implicit fed guarantee carrying them through. Running ads is a sign of desperation or stupidity. You only loudly proclaim that you're solvent if you're toast.
He's part of this whole problem.
Are you that naieve?
As for Citigroup...if they is a compelling argument as to why they're in fine shape (which they seem to have convinced most folks on CNBC of), happy to hear it. Because I certainly haven't heard one in the last few days.
Henry was actually personally responsible for the current state of Citi. As I understand it he was totally responsible for all management decisions that lead up to this point. /end sarcasm
Citi is done. We are only waiting to hear how it all finally unfolds. Hopefully Henry will blog the long weekend through and fill us in on the dirt as it happens. If you don't want to read his blog, then take thyself to CNBC and STFU.
BAC is not far behind C now.
Don't you really think we have a bigger problem that the money is leaving in droves from the market and eventually all of these stocks are going to see all-time lows including the bluest of the blue chips?
Come on...
The government will not let the company go under, so I don't think the "system" is at risk and Citi won't suddenly file for bankruptcy. I do think the common stock is probably going to end up virtually worthless, however.
Those shareholders are wiped out too?
How about this? Paulson can say the government will be buying C shares on the open market Monday to show the confidence with C.
I bet you'll see a reversal in the share price.
If you don't think the wiping out of shareholders is putting the "system" at risk you don't seem to realize that we will lose a generation of investors mainly the baby boomers.
Full Disclosure is a good thing. Anyone care to pony up?
Who's next?
M
NJ Guy: Henry very clearly is a different man. People can and do change. Give the guy a break!
The tech bubble would have happened with or without his cheer leading.
I need Clusterstock to keep me up-to-date on the latest gossip and innuendo. Keep whispering sweet nothings: "Citi is going under, your deposits are safe, Citi is toast, don't worry about your money!
So what happens in 2 weeks with BAC when everyone starts reporting that the exposure to Countrywide is greater than expected[?]
How can it be greater than expected? They bought it. That's 100% exposure.
you don't seem to realize that we will lose a generation of investors mainly the baby boomers.
So? They were already planning to bleed me dry with entitlements. I have no sympathy for them. None. Let the bastards freeze in the dark.
M
tinyurl.com/5wstef
You said you bought more. Did you? You say you're a changed man.
Shoot straight my brotha!
The government can wait 30 years for a long bond, why can't it wait 30 years on mortgage backed securities?
HA HA. Henry is a bagholder now.
Good job.
Henry Blodget said:Nov. 20, 4:27 PMI bought more...
Fortunately, I made a screen shot of his post in case he tries to delete it.
Let us know when you sell, will ya Henry?
God Bless!
I get it. Henry said he bought more shares just to dump his current holdings of C.
Isn't that the way the game works Henry? When you say buy it means that you're selling?
Correct me if I'm wrong.
thanks for your money!
Can we get a ruling?
Why we have a system that allows naked s/selling and no uptick rule is hard to understand. It seems to me that any group with sufficient capital can put a "wounded" company out of business, esp in a market environment like this one, where all buyers just step aside.
If you follow the link you provided "tinyurl.com/5wstef" you will see that Henry's "I bought more..." comment appears to be in response to the preceding comments (probably JP's) on the market being cheap. Not specific to Citibank.
JP said:Nov. 20, 4:26 PM
Wow. If henry thought the market was cheap yesterday, he must be beside himself now.
Berend de Boer said:Nov. 20, 4:26 PM
Current forecasts: S&P 500 below 300.
Henry Blodget said:Nov. 20, 4:27 PM
I bought more...
http://www.marketwatch.com/news/story/stock-plummets-citi-brink/story.aspx?guid=%7B6B692DF1%2D9427%2D4DC1%2D8160%2DD53289B74B81%7D&dist=TNMostRead#comment1082404
Don't they say that imitation is the sincerest form of flattery?
Thats the only one options that they have now.
I never liked either C or BAC.
Regards
Without our banking infrastructure, there can be no economy. Let me state that again NO BANKS = SOUP KITCHENS AND FOOD LINES!
The reason that TARP and the recapitalization (socialization) of our banking system is a failure is a result of their recent capital structures. Banks have (had) been leveraged and allowed to loan against there asset base way in excess of their capital base. That worked fine until the FASB changed the rules and instituted "Mark to Market", and underlying assets plummeted in value "the perfect storm".
On top of the dozens of large banks that have already failed as a result, Citibank (once the worlds largest bank) is trading as a pennie stock ($3 per share). Though a Citibank failure by itself will not bring down the entire banking system, it is just the latest one to do so. The stock market as a result can and will do NOTHING but go down, as long as the ailing financials keep failing.
The government needs to immediately STOP the TARP and bailout. Even if this was effective (it is not), they are simply printing more money = Dangerous implications for the value of our currency (US Dollar), and the inflationary pressure that will ultimately result.
What the government can and SHOULD do is change/remove the "Mark to Market" rule that is currently in place. When I pose this idea to friends, they all suggest that somehow this is simply pushing the problem out to the future. To which I say RUBBISH!
Yes, we have been in a housing bubble, and yes the values can decline even further but hey - What do you think that home will be worth at the maturity of the loan (30 years)? You would be hard pressed to find anyone who thought that it would not be worth AT LEAST $500k, if not more.
So Government get rid of Mark to Market, and let the banks Mark to Maturity. Any bank marking to maturity should subsequently be required to hold that underlying asset until either it is sold at par, or till it's maturity.
This action will allow banks to recapitalize organically, and without further socializing our banking system and most importantly without printing Trillions of new dollars in the process.
www.twitter.com/A_F
Yes, we need banks - very true.
Deregulated Banks NO.
The BANKERS have shit their pants.
Nationalize ALL THE TOP BANKS NOW - this will happen anyway.
This is exactly what they intend to do. The country itself has so much depth that the only way to reduce it is through inflation. I think the inflation cycle will start around March or April next year.
"This action will allow banks to recapitalize organically"
I think the banks are unable to recapitalize organically at this moment. There is no time for organic healing. This is an emergency situation.
In fact Citygroup is bankrupt now. It needs help immediatelly.
The next step is to save the bankrupt car makers.
Tough times require tough decisions.
Regards
If the electronic run on the bank continues, I'll bet we see a series of actions- including an FDIC, Federal Reserve and TARP mix of solutions with the various elements of the conglomerate split apart. Likely it is so big that Bush2 will us the GM-Ford-Chrysler Congressional session to fully fund the Citi solution.
This all happens so fast, just last week Paulson said no more large institutions were at risk of failing and I believe at the time it probably was true.
They also need to replace their management.
The government is the house and owns the house. They will crush you in a heart beat.
Be careful if you're long or short Citi this week.
Time to hit the "reset" button on everything.