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bkkandrew

Citigroup seeks 'emergency cash'


Cirigroup shares plunged on Friday as board members met


Executives of Citigroup, one of the biggest banks in the US, are in emergency talks with the US Treasury to gain much-needed funding, reports say.

The bank is also said to have contacted certain shareholders to assess their interest in increasing their stakes as as it faces an uncertain future.

Citigroup stock ended 20% lower on Friday as its board members met.
Last week the company announced 52,000 job losses worldwide on top of 23,000 job cuts previously announced.

No one from Citigroup was immediately available for comment.

There are fears that without further funding the bank might not be able to survive. Any money would be in addition to the $25bn injection it received in October from the US Treasury.

Options being discussed included a government cash injection as well as Citigroup selling some of its business, reported The Sunday Times.

Chief executive Vikram Pandit told employees on Friday that the firm did not want to change its business model, Reuters reported, citing two employees.

He also reiterated that the firm had a robust capital position.

But Sean Egan, analyst at ratings agency Egan-Jones Ratings, said, "Citigroup needs a deep-pocketed investor that is ready, willing, and able to step up in the next few days."

"The only one who comes to mind is the government," he said, adding that $50bn might ne needed.

In a bid to reassure investors, Citigroup is running advertisements in US and international newspapers on Sunday underlining its stability. It is widely expected that Citigroup will issue a statement on Monday before the US markets open.

Source:

BBC NEWS | Business | Citigroup seeks 'emergency cash'


Note the $50BN - a greater amound than the FDIC 'pot'. Perhaps Butterfly will listen now.

Second thoughts - nah - no chance!

Butterfly

you mean like last time when you claim another bank will fail and bring down the FDIC ? you have no clue how the US banking system works, and no clue how FDIC is structured. You just read blogs and extrapolate from there with your funny imagination.

bkkandrew

^Letting Butterfly continue in his state of denial, meanwhile, back in the real world:

Citigroup Gets Government Guarantees on $306 Billion of Assets

By Bradley Keoun

Nov. 24 (Bloomberg) -- Citigroup Inc. will have more than $300 billion of troubled mortgages and other assets guaranteed by the U.S. government under a federal plan to stabilize the lender after its stock fell 60 percent last week.

Citigroup also will get a $20 billion cash infusion from the Treasury Department, adding to the $25 billion the bank received last month under the Troubled Asset Relief Program. In return for the cash and guarantees, the government will get $27 billion of preferred shares paying an 8 percent dividend.

The Treasury, Federal Reserve and Federal Deposit Insurance Corp. said in a joint statement that the move aims to bolster financial-market stability and restore economic growth. The decision came after New York-based Citigroup’s tumbling share price sparked concern that nervous depositors might pull their money and destabilize the company, which has $2 trillion of assets and operations in more than 100 countries.

“It really was a must-do thing,” said Nader Naeimi, a Sydney-based strategist at AMP Capital Investors, which manages about $85 billion. “If they’d let Citigroup go, that would’ve been disastrous.”

Chief Executive Officer Vikram Pandit, 51, told employees on a Nov. 21 conference call that he doesn’t plan to break up the company. He and Chief Financial Officer Gary Crittenden said they don’t expect to sell the Smith Barney brokerage unit, two people who listened to the call said at the time.

Citigroup’s board, led by Chairman Win Bischoff and independent director Richard Parsons, met the same day to discuss the bank’s options.

Citigroup issued a statement last week saying the company has “a very strong capital and liquidity position and a unique global franchise.”

From:

Bloomberg.com: Worldwide

Remember Citi's " off balance sheet liabilities" are to the tune of $1.28 trillion and their total outstanding liabilities around $ 3 trillion...

But the FED's 'solution' - throw $25BN, then $20BN, then $300BN, then...............

Spin

^ futures falling on that news

bkkandrew

^^If the futures guys had been really future-oriented, they would have read my OP on this thread. Citi was one of the main banks identified for collapse. The date of my OP was the 7th February...

Panda

If the worlds banks are running on money they don't have and have lent out more than they can afford on the premise that the worlds wealth will just keep expanding forever at the same rate of the past 5 years,-- and so be able to pay back the money the banks have over-lent, then they deserve to fail.

These so called financial experts make everything sound so complicated that they are the only ones who can comprehend it. But in the end the worlds econemy runs just like any other budget, --- If you spend more than you earn, sooner or later you have to pay it all back. Or at least, somebody has to pay for it.

Butterfly

so they are not going to go bankrupt after all and the FDIC with them ? how is that possible ? weren't you predicting another collapse of the bank just a few days ago ?

bkkandrew

^As with AIG, the bailout just gets bigger and bigger, until it swallows the FED. They know they are too big to fail, but they are also too big to bail.

bkkandrew

Report: Government prepared to lend $7.7 trillion

Butterfly

^ well technically debt is money, by participating in those markets, they will just control more money, might actually be interesting in terms of monetary policies, going beyond the T-Bill market

Panda

So who's going to pay for all this since the US government is already in debt to about 65% of GDP?

Oh, I get it now. After the $US looses half its trading value, the international debt will only have to be paid back at about 35% of GDP in actual goods and services. Even though the international debt will eventually be paid back in full as the numerical value in $USs, since all the debt is written in $USs. So, in the end other countries who have bought US debt will end up with about $5 trillion less in actual tangible goods and services compared to when they bought the $ debt. Sounds like a pretty good deal . Well, depending on where you live.

The US economy revives ahead of the rest of the world. Starts consuming imported goods until the bubble bursts again and around we go again until the ultimate financiers of the world economy (people who actually produce stuff) can give no more.

This world system of trade we have now is absolute madness based on debt and the confidence in paper money. But governments all over the world are in so deep with the $US that they are like the monkey with its fist in the jar of peanuts.
Do you know that one? Its how to catch a monkey based on his greed. You put some peanuts in a glass flagon which is tied to a tree. The monkey comes along and puts his hand down the neck of the flagon to get the peanuts. He grabs a handful of the prize but then cant get the closed fist out through the narrow neck of the flagon. The hunter then comes along and clubs the monkey because he is too greedy to let go of peanuts and escape. Game over. Hunter wins.

bkkandrew

At the risk of sounding like Scottie 'its worse than that - he's dead Jim' - it is actually worse than that.

The 65% figure is now more like 74% and rising fast on current, non-bailout-related expenditure. But crucially, as shown from my battles with Butterfly (threads passim), this excludes State and Municipal debt, which is perverse, as (demonstrated by recent events) they soon run to the FED when they run short of funds... If you added up that lot you would need a large calculator indeed.

Panda

Oh well they still have the old printing press and plenty of buyers out there at the moment.
Shouldn't be too hard to raise a few $trillion more. The world is full of suckers at the moment.

bkkandrew

More on this - Arnie says "I'll be back", but this time, he is referring to the FED for a bailout!

BBC NEWS | World | Americas | California 'faces budget crisis'

bkkandrew

The bond vigilantes are restive.

We are not yet facing a replay of the 1970s 'Gilts Strike', but we are not that far off either.

There is now a palpable fear that global investors may start to shun British debt as the budget deficit rockets to £118bn -- 8pc GDP -- or charge a much higher price for to cover default risk.

The cost of insuring against the bankruptcy of the British state has broken out -- upwards -- over the last month. Yes, credit default swaps (CDS) are dodgy instruments, but they are the best stress barometer that we have.

Today they reached 86 basis points, near Portuguese debt in the league table. For good reason. Alistair Darling has had to admit that the British economy faces the most sudden economic collapse since World War Two, and the worst budget deficit of any major country in the world.

Ok, this is a lot lower than Iceland, Ukraine, Hungary, and other clients of the IMF, but is significantly higher than Germany (35), USA (43), and France (49).

After trading at similar levels to our AAA-rated peers for years, we started to decouple in August and then began to soar in October.

We reached a fresh record the moment the Chancellor told the House of Commons that the budget would not return to its already awful condition until 2016.

Should we be worried? Yes.

Marc Ostwald from Insinger de Beaufort said Gilt issuance would reach £146bn in fiscal 2008/2009. Britain will have to borrow £450bn over the next five years.

This is an utter fiasco.

With deep embarrasment, I plead guilty to supporting the Brown-Darling fiscal give-away -- though with a clothes peg clamped on my nose. As the Confederation of British Industry and many others have warned, we face an epidemic of bankruptcies unless we tear up the rule book and take immediate counter-action.

The Bank of England's drastic rate cuts are a necessary but not sufficient stimulus. Monetary policy is failing to get traction because the credit system has broken down.

We face the risk of a rapid downward spiral if we misjudge the threat at this dangerous moment, as we sit poised on the tipping point. Besides, the whole world is now resorting to fiscal stimulus in unison under IMF prodding. Sticking together is imperative. If countries reflate in isolation, they can and will be singled out and punished. That is the lesson of 1931.

But this is not to excuse the Brown Government for the total hash it has made of the British economy. It presided over a rise in household debt to 165pc of personal income. How could the regulators possibly think this was in the interests of British society? What economic doctrine justifies such stupidity? Why were 120pc mortgages ever allowed? Indeed, why were 100pc mortgages ever allowed? Debt is as dangerous as heroine.

Labour ran a budget deficit of 3pc of GDP the top of cycle. (We had a 2pc surplus at the end of the Lawson bubble, so we go into this slump 5pc of GDP worsee off). The size of the state has ballooned from 37pc to 46pc of GDP in a decade, and will inevitably now rise further.

It is because Gordon Brown exhausted the national credit limit to pay for his silly boom that today's fiscal stimulus -- just 1pc of GDP (China is doing 14pc) -- is enough to rattle the bond markets. Our national debt will jump in what is more or less the bat of an eyelid from under 40pc of GDP to nearer 60pc -- according to Fitlch Ratings. It is enough to make you weep. But is this bankruptcy territory? Not yet. Britain will remain at the mid to lower end of the AAA club.

A Fitch study today estimates the "fiscal cost" of the bank bail-outs (which is not the same as just adding guarantees to the national debt) is 6.9pc of GDP for Britain -- compared to Belgium (5.7pc), Germany (5.8pc), Netherlands (6.3pc), and Switzerand (12.9pc). We are not alone in this debacle.

If and when the storm blows over, Britain should still have a lower national debt than Germany, France, or Italy. It will certainly have a better demographic structure that most of Europe (except France and Scandinavia), and less catastrophic pension liabilities than most.

The situation is desperate, but not serious -- as the Habsburgs used to say. Fingers crossed.

From:

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Its not just the USA - The UK is also effectively bankrupt - don't forget that...

bkkandrew

The penny drops that all this Government borrowing cannot be funded:

Published: December 1 2008 02:00 | Last updated: December 1 2008 02:00

Fears are rising over the ability of governments to raise the vast amounts of debt they need to pay for economic stimulus packages and bank bail-outs.

Faced with the prospect of governments around the world issuing more than €2,000bn ($2,535bn) of bonds in the next year, bankers are warning of potential problems in meeting funding needs.

Roger Brown, global head of rates research at UBS, said: "Governments are already running into problems, which does not bode well so early after the recapitalisations and extra funding needs have been announced.

"We do have to ask whether there will be enough investors to buy the bonds, or at the very least whether this will push yields substantially higher to attract them. Given the volumes involved investors may decide to wait and see if yields rise."

...The UK and Italy may face the greatest difficulties. The UK is expected to issue £10bn ($15.3bn) of bonds this month. In the past, monthly volumes have averaged about £2bn a month. The government is also expected to issue £60bn in the remainder of the financial year to the end of March - more than it would previously issue in an entire year.

FT.com / UK - Concerns grow over ability of states to raise debt

Panda

All these governments giving money to their bankers and no one to borrow it from.
Might as well be monopoly money unless these countries can start producing tangible goods of some real value to trade.

bkkandrew

Meanwhile in the UK - a rather odd, hidden clause in the new Banking Bill:

The section the new Banking Bill seeks to abolish reads as follows:

And be it enacted, That an Account of the Amount of Bank of England Notes issued by the Issue Department of the Bank of England, and of Gold Coin and of Gold and Silver Bullion respectively, and of Securities in the said Issue Department, and also an Account of the Capital Stock, and the Deposits, and of the Money and Securities belonging to the said Governor and Company in the Banking Department of the Bank of England, on some Day in every Week to be fixed by the Commissioners of Stamps and Taxes, shall be transmitted by the said Governor and Company weekly to the said Commissioners in the Form prescribed in the Schedule hereto annexed marked (A.), and shall be published....

Guy Fawkes' blog of parliamentary plots, rumours and conspiracy: Something Odd in the Banking Bill

Now then, someone isn't planning to keep quiet the cranking up of the printing presses are they?

Spin

Well lets face it, the countries in the most debt are the ones who will come out of all this on top when their currencies crash as Panda pointed out superbly already.
May as well go out with a bang.

who

Well lets face it, the countries in the most debt are the ones who will come out of all this on top when their currencies crash as Panda pointed out superbly already.
May as well go out with a bang.


................CRASH - with reference to what?


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