Amen.

Zed?

Elliot. Faster draw than me.

Ron has been telling the credit card people who call and want their money that he has already paid them through the bailout and that it is Sunday to boot and to f-off.

Would (and could) Citigroup be okay if Citibank failed?

Isn’t it astounding how these banks have been deaf to the government’s hope that the money would shore up lending?

I know Al Qaeda claimed they would destroy our dollar to ruin our economy, but who knew Wall St. banks might take a run at that too.

I don’t see buying stock or warrants as nationalizing. In my recolections of when S. American countries would ‘nationalize’ a company or industry it meant they stole it from it’s private owners and ran it for profit. What’s happening now is the government loaning money, insuring inter-bank loans, buying warrants and leaving all stock-holders in place with the bank management. That’s surely not nationalization. But, even what the FDIC does to a failed bank isn’t nationalization.

What I have occasionally suggested as a potential solution to the MBS problem is to take those toxic assets (certainly seems like nationalization), sort out the good from the bad, return the good to the banks, fix the bad (as happens sometimes in bankruptcy court) and return them to banks — hardly nationalization to give it all back, is it.

What I’m concerned about isn’t nationalization anyway, it’s how severe the national economic problem is and what the solution is and exactly precisely how much force government has to use to fix the problem. If you have a HOPE program which is voluntary and nobody partakes, then you move to another level of carrot or force to fix things. We’ve exited the Bush era and still haven’t gotten very forceful. I really don’t know what all the fuss is about. Have any stockholders lost it all when a firm was solvent? No! Phil Gramm said we were a nation of whiners. Maybe he was just talking about Wall Streeters.

So, we’re going to save the shadow banking system as well as the banks themselves. We may need some new printing presses.

Bailout money is going to people who are already rich. Surprise.

This is a joke, a bad one at that.

The tax payers are somehow giving billions and billions of dollars to banks without designating a specific purpose for the money, not even getting a report on where it went. Hello!

The owners of these banks, the shareholders are the ones who should be reaching into the pockets and helping their company make it through tough times. If they can’t do that what exactly IS ownership? They get to receive dividends? For what? what earnings? Why not pay out for loses?

This is complete nonsense. The shareholders should not figure into the equation. The interest of the people/government is to maintain the services a bank provides it’s customers, NOT ITS OWNERS.

Therefore the bank should be taken over and all non customer matters given to the shareholders, that’s where they were expecting the big profits.

The banking can go on with fees from interest earnings on loans ie the difference between that and deposits less the operating costs (absent the huge management salaries) Simple. Bye Bye CitiGroup and don’t let the door hit you on the way out.

Banking needs to become a publicly owned utility.

Simple as pie.

Why do I have the sinking feeling that we are all being scammed?
And how would we know one way or the other?

take this

http://vimeo.com/3261363

If my business fails , as the owner I take the loss .
Why should the banks be any different?

speaking of our guy Alan Grayson, good story (very short) in Orlando Magazine this month. An interesting life.

http://www.orlandomagazine.com…..-own-words

not amused.

citi is bankrupt. the shareholders should lose all their equity, and the bond holders should lose a lot. taxpayers should only be responsible for recapitalization, not prior loses.

even when Geithner and Summers are forced to the right thing, they’ll do it exactly the wrong way.

Long history of that over the past 8 years, but I don’t suppose W invented it either.

Fuck citi. Let those predatory bastards fail.

The fact is that banks are like like a cancer which has spread so completely through the body if you let it die, or help it die, it takes the host with it.

We need a banking and credit system. We just don’t need the one we have. The talk is to save it because without a banking system our society would completely break down. So the rant is to “fix it”, save it, clean it up and so forth.

What we need is to save banking and the function that banks perform, not Citi or BOA and certainly not their shareholders.

What we are facing is saving a bunch of self capitalists who contributed virtually nothing to the society. They sucked at it and are sucking at it now.

selfish capitalists

What we are facing is saving a bunch of self capitalists vampires who contributed virtually nothing to the society. They sucked at it and are sucking at it now.

Fixed.

now I know we’ve been scammed !!

if it was phil gramm pulling this shit….

Too big to fail!

Who comes up with these concepts?

I understand the need for a strong banking system , just not the unregulated mess we’ve got now

Too big to fail!

Who comes up with these concepts?

LOL. please excuse the diary whore, but i just put it up and it’s not completely OT wrt to citi and “too big to fail” -
Which Idiot Decided to Repeal Glass-Steagall?

Obama is an idiot or a tool for picking those two conventional “wisdom” losers. We’re fucked. Totally fucked.

what happens to accountholders. will the FDIC be able to cover?

Selise,

Why don’t our critters know this, or if they do why are they representing walls street and not the people’s interest?

Either we have stupid uninformed incompetent people in congress or we have people who are corrupted and don’t care, who lie and who are only in it for their own selfish interests.

Either of those is disturbing or frightening.

As Clark said, Our government has failed you.

Yes they have

How long can Obi go down the road with those jerks who will produce no results? What will it take for him to give them pink slips and call for some new solutions?

These guys are not going to get him out of trouble, us out of trouble.

But what or when will make him drop these guys like a lead sinker and look for something new? Or will it all crash anyway at this point?

they do why are they representing walls street and not the people’s interest?

might it have something to do with the $100 million citi spent on lobbying and pr the year before getting glass-steagall repealed?

At some point the criminality of these guys, the financial sector fat cats has to be raised.

These were no just honest mistakes. This was no different than mafia behavior.

RICO

yea, but where does that 100 million actually go?

I seriously don’t understand the money associated with lobbying. How DOES it work?

citi has operations in over a hundred countries. i’ve been asking what’s going to happen to depositors not covered by fdic (those costs are usually covered by fees paid by covered banks, but i guess ultimately it comes down to the tax payer?). covering depositors is not only an issue of fairness – it’s probably the only way to prevent runs. my preference is for nationalization of the major multinationals to be coordinated as much as possible with other countries. going to be tricky… and imo worse the longer it’s delayed.

They’re too big to allow them to fail. Big difference there. It’s a big difference particularly since we, and by “we” I mean our government, allowed this situation to develop, knowing that this was a possibility.

dude, i don’t know…. but i’m going to make a couple of guesses: 1) a criminal investigation is probably necessary to answer your question and 2) rubin got over $115 million from citi after retiring from the treasury after pushing for repeal of glass-steagall. revolving doors like that cost a pretty penny.

This a good question, and I’ve seen it mentioned before. I haven’t seen any plausible suggestions for how to fix that, though. To some extent, the foreign governments will have to cover their depositors somehow, I fear. Maybe they’ll think before allowing multi-national bank mergers, too.

“I do not have a fear of undue concentration of banking powers”
—alan greenspan, 1987

And here I was worrying about the revolving door at DoD.

YIKES Selise, this is really creepy. How does these thieves have the balls to appear in public? And why is there not more outrage at such blatant unethical behavior?

Obama must be blind to this.

I am going to sleep.

Maybe they’ll think before allowing multi-national bank mergers, too.

that was part of the IMF’s program of capital market liberalization. *g*

Greenspan was the ultimate “go along to get along” guy. I sometimes wonder if the guy had any real principles.

I sometimes wonder if the guy had any real principles.

sure he did. greed.

Obama got lots of support from the financial industry, as did most of the Democratic Presidential candidates last year. My guess is that one of the requirements for the job he’s in now is to make sure he doesn’t see what’s going on.

If he was curious, he’d certainly have caught on by now.

Goodnight, SanderO.

good night sandero and good night to all.

Yes, NOT amused at all, disgusted is a better adjective.

It isn’t just that the banks are insolvent. They became that way through a pattern of massive fraud. Any money funneled to them will be used to keep the frauds going. It’s like giving money to crooks and expecting that they will go straight. It isn’t going to happen. It’s why nationalization, real nationalization, is the only way to go, and as part of this process, the leaderships of the major financial institutions need to be removed and investigated with an eye to prosecution.

Now I know that short of a revolution this is not going to happen. The elites will continue to try to find ways to bail out the banks with as few reforms as possible. What this means is that 1)this is going to be extremely expensive; 2)it isn’t going to work; and 3) depression will not be avoided and will last much longer than it needs to.

Alan did a post at FDL and answered some of my concerns. Impressive dedication and use of his intelligence. They won’t answer him so appoint a special counsel to ask the bankers questions under oath.

One of the main goals of actual “nationalization” (more properly, temporary receivership) of a bank is the removal of the management team who fucked up so very badly. Insofar as the USG taking a 40% stake does not achieve that goal, it is a non sequitur step. Obviously the request from Citigroup management is meant to avoid them losing their own jobs — or at least to avoid them losing control of the helm. Maybe because if the shareholders get wiped out — a side effect of the “nationalization” — then they will likely never ever work nor helm in that industry again. But since the insolvency ship has already sailed, that sure seem like grasping at straws at this point. What possible future recovery scenario could those people be seeing off in the distance?

here is a financial analysis for you.

More on Goldman Sachs’ massive negative cash flow
I wanted to follow up on the financial information on Goldman Sachs that was presented in Midas last week. The negative operating cash flow numbers were so staggering that I wanted to see what was going on for myself. Goldman went public in early May 1999, so I tallied up the numbers from 1999 thru the first three quarters of 2008, the most up to date financials filed by GS. To summarize what was reported last week (my numbers will be slightly different because I shifted the time period slightly). From 1999 – 3rd qtr 2008, Goldman reported at total of $48.4 billion in net income. During this period, Goldman reported a total of $238 billion of negative cash flow from operations and investing (mostly operations) which was funded by $246.5 billion in cash from financing, primarily bank debt and bonds.

I also wanted to look at the quality of Goldman’s earnings. From 2002 thru Q3 2008, net interest earned represented anywhere from 35.1% to 113% of total net income (77% of net income during 2008 so far has been this “carry trade”). That means that not only has Goldman’s operations sucked up $238 billion in cash over the last 10 years, the quality of its earnings has been largely dependent on being able to earn more interest on its investments than it pays to finance those investments. I thought Goldman Sachs was an investment bank that made money from selling stocks and bonds, advising on mergers and acquistions and other traditional securities firm activities. But based on the nature of their earnings, Goldman looks more like an savings and loan bank, hoping to make more on its investments (interest income) than it has to pay out in the cost of its liabilities (interest expense).

If you step back and think about what Goldman is doing conceptually, the operations of the firm look somewhat like a Ponzi scheme. As you follow the pattern of cash flow use and the financing required to fund their operations, it looks like they require more and more financing just to tread water. For example, in 2007, GS had $1.1 trillion in assets and generated $11.4 billion in net income (GAAP accrual income, not cash on cash economic income). This is a 1% return on assets. Do the large shareholders of GS really want to pay out massive compensation to the top management of GS for delivering a whopping 1% return on assets? I can do better and take less risk investing in 1 yr. bank CD’s. I’m not quite sure why anyone would want to own this stock. I may buy some long term out of the money puts on GS on Monday.

What I find even more interesting to contemplate is that, based on looking at Goldman’s uses and sources of cash, if the market for funding Goldman’s balance sheet were to slow down, there is a high degree of probability that Goldman would become insolvent. Remember, Goldman’s ability to service its debt and rollover its short term financing is highly dependent on the quality of those assets. If the music stops on Goldman’s source of financing, and Goldman has no ability to generate cash from its portfolio of rapidly deteriorating assets, Goldman collapses. This would explain why the Fed/Treasury is working so hard to squeeze money from the Government/taxpayer to keep these banks alive. Let’s not forget that the Fed is quickly swapping bad assets from these investment banks for Treasuries held by the Fed and taxpayer gurarantees. For now, this is keeping firms like Goldman alive…

Then, a comment from one of GATA’s finest:

But what I find most amusing is the statement made by CEO Llyod Blankfein the other day, under oath in front of Congress, that he didn’t really need the $10 billion in TARP that Paulson gave GS in October and that he wanted to pay it back. Well Lloyd, where is that $10 billion? If you didn’t need it, why don’t you pay it back today? The answer to why you can’t pay it back is no hidden secret – the answer is that Goldman can’t pay it back because they need every dime they can get ahold of just to keep their operations going. The truth will always be found if you follow the money. My hat is off to the Midas contributor who originally looked into this quite revealing topic. My guess at to why Jon Winkelreid, who I remember as a rapidly rising star in fixed income corporate finance when I worked there for 2 years in the late 1980’s, unexpectedly left Goldman last week despite being a candidate to run the firm is that he is wisely trying to distance himself legally from being associated with a collapsing Ponzi scheme.

now,obombya and his myrmidons are not ignorant of this reality. the looting that will make w a third rater gangster is on.

of particular interest is peter orzag[sic]. an economic adviser to russia in the era of the oligarch looting of state assets. and economic adviser to iceland and the policies that looted the iceland state tresury. gangsters can be demtillians as well as reptillians, you know.

~~~ModNote: A post this long really deserves to be a diary.~~~

I don’t think management that has to be bailed out by the taxpayers should be allowed to work again in that industry anyway – they’ve already demonstrated incompetence enough – regardless of whether the company gets nationalized or not.

Don’t disagree, but since what they do is not licensed, how would you stop them? If there are no applicable crim laws to use against them, then the only way I can see to get them out for good is to tie each one of them personally to a total-shareholder-loss event.

Ian,
Is this linked article more substantive than a paranoid rant?

http://www.globalresearch.ca/i…..leId=12328

Are we being cleaned out via the Treasury by the international financiers? Is the long delay of ‘nationalizing’ and making these banks clean up the books, just a deliberate pause or window for profit takers to remove their loot while the dollar is still strong?

At the end of the 80’s 16 banks failed, real estate crashed,
and the government took action by forming a quasi governmental trust “resolution trust corporation”. They did not nationalize banks. What they did was oversee loan workouts by banks, in order that bad debt became assets on the banks ledgers again. On non performings, resolution trust took the collateral on the bad debt held it and turned around and at least broke even on the transaction.
Even though it was a zero sum game, the banks survived and the taxpayers didn’t take a bath. There are 2 major differences this time around. 1.) it is much worse because of sub-prime instruments injected into the market. 2.)more
importantly, at the end of the eighties, banks had separate
corporations for foreign operations. This time with the relaxation of regulations the corporate assets seem to be
co-mingled probaly to run up value in the market. So the question I would ask is bailout money being used to bailout
the global banking operations of these firms. If so there needs to be an isolation of US assets, address those and let other government deal with corporate operations in their host country. AT a minimum there should be a workout process, and rather than buying toilet paper from these banks, scoop the collateral get the bad loans to a balance ratio where the bank can be recognized as solvent and go back to the zero sum game. Any capital infusion into these banks should be for the sole purpose of extending credit to American businesses to get the economy in the country moving again. Increase revenue as a result of economic expansion and lower both the debt and the deficit. I would get China off our books and go back to a fair trade posture, to get trade back in balance. This would require moving away from a service economy to a manufacturing and industrial base again. this will take years to do between growing new business and educating the next generation of engineers and scientists, but it has to be done.