The Blog Of The Securities Industry Professional Association

Walking The Greenback Mile

Over a year ago many of you who receive the BDExchange newsletter may recall I speculated that 3 of the 5 top firms on the street were underwater and even went so far as to say that I truly Believe Bear Stearns and Citibank may in fact be under water.  In November of 2007 I felt the Fed chairman was merely lowering rates in the face of inflation in order to allow Citibank and some others to “rob Peter to pay Paul”.

The fact that Bear Stearns collapsed did not surprise me, however a few weeks ago I was stunned when Citibank announced that it was purchasing the struggling Wachovia bank in a deal that was endorsed and financed by the Fed and FDIC.  Under terms tentatively announced at the time. Citibank was going to pay 1.00 per share and would receive assurances from the government that they would not be responsible for up to 300 billion in bad loans.  A few days later, Wells Fargo came in and announced “ we will pay 10.00 per share and do not need any government interference or aid”…..Yet the FDIC and Fed stood by the earlier announced deal and said they think the Citibank deal is in everyone’s best difference.  After a brief threat of lawsuit, Citibank backed down like they were bringing a knife to a gun fight.  Although I know I am know  financial wizard like the men who are running this Bailout Blarney, I do know plain old common sense: 10.00 per share is more then 1.00 a share ( unless of course you ask an Enron Accountant).  I also know that 300 billion in tax payer commitments for bad loans versus NO tax payer commitment for bad loan is a bad thing.  So what gives?

Brace yourself…….I will reiterate what I have previously writing about.  CITBANK is under water and the government is doing everything they can to keep them afloat…even going so far as to create FAKE , that’s right , FAKE takeover notices in which they can fool the American taxpayer into thinking that CITI is on solid ground.  Citi’s ground is about as solid as the ground New Orleans is built on…Silt and mud and just hoping the rain will stop long enough so it can dry our and solidify.  Its not happening.  Citibank is now under 10.00 a share and most likely in a few weeks they could be another asset of JP Morgan or Bank America.

Unless of course the Government gets involved and decides they should help ‘finance a Citibank takeover of GM and Ford”….In this current state, anything is possible.  In reality, the current conduct and statements by the likes of Paulson and Bernanke could be the reason why there is no trust in their Bail out plans. It appears that every time they speak..the market tanks…Perhaps its an indication that most American investors think they are either full of crap or have no idea what they are doing.  However, setting up fake takeover’s using tax payer dollars is just wrong (fraudulent?) and may be a reason why investors are hoarding cash and waiting to see what the real damage is. Citibank is just the beginning…Goldman Sachs appears to be heading down a similar path, and its stock has been pummeled despite reporting some earnings in their latest quarter.  The real question that should be facing investors is:;;  Who can you trust?  The Fed?  Treasury? FDIC?  The company executives? I just want to leave you with one tiny bit of sobering news:  The U.S government just concede that they have now spent 3.5 TRILLION dollars on this Bailout Blarney…..and depite that Citi is under $9.70 per share and Goldman is down 50% since August….Look out below!

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November 12th, 2008



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