The Citi That Never Sleeps

Certainly Pandit and company are not sleeping a lot lately. What will the government do, oh, what will it do? Again, Citigroup on the ropes is no surprise. It is the poster child (along with the likes of Bearn Stearns, Lehman and countless others) for the derivatives mess. Yet it takes the game a notch higher than others. This particular institution has hundreds of billions of uninsured deposits,especially over seas, and over one trillion in OFF BALANCE SHEET assets. Seriously, who lets a financial institution that is too big to fail have over a trillion plus in off balance sheet crap. You know there is a reason they keep it off balance sheet and it is not because they want to surprise their shareholders with a big bounce when they bring it on balance sheet.

Undoubtedly the government will do some very expensive deal, but hopefully shareholders and bond holders will pay the price. I know some of my readers are among the shareholders, but you take your chances you pay the price. Taxpayers did not make that bet and should not pay any more price than absolutely necessary. I do note that the numbers they are discussing, $50-100 billion, ain't going to be nearly enough. Citigroup is just getting its hook in the government's mouth. We are all suckers now.

http://www.nakedcapitalism.com/2008/11/citi-in-talks-with-us-to-create-bad.html

http://www.nakedcapitalism.com/2008/11/meredith-whitney-says-citi-is-goner-bbc.html

For good or bad, Citigroup or Citibank has a long history of living life on the edge and the government might be well adivsed to consider an orderly winding down or, at least, neutering the beast. You need to consider what knock on effects this has on CDS positions, but you need to do that in whatever action the government takes. This is simply a company that does not learn its lesson and we should not be paying the price for their repeated mistakes. Water board the officers and move on.

So you know, I once had put options on Citigroup, but they were sold long ago, apparently sooner than they should have been sold. Not complaining, though, as I made good money.

http://www.nakedcapitalism.com/2008/11/new-york-times-citi-woes-due-to-lousy.html

On the bad bank proposal for Citi, i.e. putting toxic debt in a separate bad bank, the best comment I have seen was on Calculated Risk, where he noted that he thought Citi WAS the bad bank. Oh so true.