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Citibank lost 27% of its value today and 47% over the last 3 days.
The amazing thing about today's Dow market crash (-5.55%) is that the volume was very high. Most of the big drops have come on moderate volume, while today the volume was a staggering 530 Million (average 332).
Just posting - don't get many 11% drops in the Dow in 2 days. S&P 500, just as worryingly, is down over 13% the last 2.
no wonder Citi was harrassing me 7 days a week over $47
:lol just noticed their decline of 47%...
:depressed:depressed:depressed:depressed:depressed :depressed
Citi is one of those companies I wish they'd rip apart. I've never applied for an account with citi, but I have like 5 of them because they keep acquiring my crap. I think they're stalking me.
Wow.
And really the worst is yet to come. The begining of next year is going to be extremely tough after a crappy holiday shopping season.
Been saying this for months. Most people have no idea what is about to happen.Quote:
Originally Posted by MannyIsGod
I would say the fall in consumer spending is probably already built in. What's taking us lower is people predicting massive unemployment. Also, and you won't like hearing this, the market has zero confidence in Obama.Quote:
Originally Posted by MannyIsGod
Seriously, Obama is not an iota of the reasoing behind this. The fundamentals are NOT strong, and getting weaker. That is why.
On a side note, the "Black Friday" deals this year are uniformly terrible. I used to be one of those idiots standing in the cold weather at 2am to get a $399 laptop (back when those were special). That indicates to me that the chains are realizing that loss-leaders likely won't have much effect on other merchandise, so they are just trying to preserve profit margins on the goods that will be sold.
I think Citibank is in a much better captial position than, say, WaMu was when they went under. It's not likely that Citi will experience a run on deposits like, and their business model is much more diversified. Remember, it was only a couple of months ago it had the cash available to make a bid on Wells Fargo.
You may see some serious job cuts (actually, you WILL see job cuts), and possibly some divestitures of other businesses, but it's not likely to go bankrupt.
stock market is a leading indicator and trades based on probable future events. Obama is a variable and brings a whole lot of uncertainty to the market. Is it his fault we are here, of course not, but does the market have faith he can be of assistance, I would say not.Quote:
Originally Posted by kwhitegocubs
Right, they announced the 53,000 cuts earlier in the week. And you may be right about their capital position, but I don't mean to say that they will go bankrupt this week or anything.
They do have a lot of private cash, so I might be exaggerating, but it's not unthinkable.
You think it would be doing any better under McCain? Really? Whatever, I don't want to make this into an Obama thread.
Exactly. This is so far beyond politics.Quote:
Originally Posted by kwhitegocubs
Ok, if I buy this its only with the caveat that the market has zero confidence in any politician's ability to solve this.Quote:
Originally Posted by 2centsworth
Agreed...it's not anything intrinsic to Obama.Quote:
Originally Posted by MannyIsGod
Quit "whining", citizens. Phil Gramm, multi-millionaire, says everything is not only OK, but he has no regrets blocking the regulation of financial markets and obscure financial instruments.
The entire Repug/conservative philosophy of free markets and small government has been obliterated as corps and capitalists grovel on their obese bellies for govt welfare.
And Obama is keeping his mouth shut where he could just tell theQuote:
Originally Posted by boutons_
public that there will be no new taxes and tax cuts to get the
economy rolling. But he keeps hiding in the deep recesses of Chicago
and let's the people wonder what his policies are going to be.
Some damn leader. Maybe he, as a great socialist, wants things to
get just as bad as can be and then step in with Uncle Sugar and make
us all equally poor. Except of course the ruling class which will be
the socialist.
Surely after seeing the Dimms in action the last few days no one
really expects the dumb ass government to do anything but make lots
of noise and create confusion. Don't you love the 700 billion boost
in the economy.
:lol
What exactly do you want Obama to do?
Doing nothing is pretty much want self-claimed libertarians want.
yes I do. market/money makers and shakers are expecting obama to milk them and give to the UAWs of the world. Whether you like it or not, that is the sentiment.Quote:
Originally Posted by kwhitegocubs
Are you a market/money manager?Quote:
Originally Posted by 2centsworth
The markets factored in Obama's presidency months ago, when it became probable that he would win, whottt's opinion notwithstanding.Quote:
Originally Posted by kwhitegocubs
Today was simply another reaction to the drumbeat of bad news that is worse than projected.
The government is still projecting a 1.1% growth in US GDP next year, and that strikes me as way overly optimistic.
The market knows what Obama can and can't do as president, and that matters less than:
JPMorgan cutting 3,000 investment banking jobs
Jobs data miserable, regional factories slump
Jobless claims jump unexpectedly to 16-year high
Grim tidings for US Christmas shopping season
etc
etc
etc
It should surprise no one that a conservative would seek to pin as much bad news on Obama as possible.
It will happen as surely as the sun rises in the east tomorrow. (mayan death cults not withstanding)
I understand, political agendas are at stake. There is way more to life than money. However, I would argue money is the backbone to everything. My only desire is for the market to rebound. If we judge obama on his campaign rhetoric, then we're headed for disaster. However, his recent interviews lead me to believe he is going in a different direction. Total uncertainty and the market HATES, HATES, uncertainty.Quote:
Originally Posted by MannyIsGod
The market isn't going to rebound until it shrinks from big business going under paving way for more responsibly fiscal smaller business to expand.
That is absolutely correct. And he hasn't said anything different. AsQuote:
Originally Posted by 2centsworth
far as most market/money people know bigger taxes are coming. And
he sits on his fist doing zip.
your choices over the last 8 years got us to this point.
really, is there any more shit you want to pile on obama?
haven't you created enough shit for him to clean?
He isn't president yet, dummy. (with all due affection to my favorite curmudgeon)Quote:
Originally Posted by xrayzebra
Kind of hard to issue executive orders and intiate policy proposals before you actually, say take the oath of office.
If you did not save during the good times, you will after this shit.
Tell us all about the big bad NAU, and the FEMA Death Camps. :rolleyesQuote:
Originally Posted by romad_20
here's a little perspective on this market. Go back to 2000 to 2002. The Dow reached a high of 12,000 and the Nasdaq hit 5000!!! Then the internet bubble burst, then 9/11, and then massive corporate fraud was discovered in 2002. There was zero confidence in the market. Then came all sorts of incentives to invest such as, capital gains tax reductions, income tax reductions, low..low... interest rates, incentives for capital expenditures. The market responded extremely well and we almost recovered fully except in the Nasdaq, but even it was starting to roll.
Then what?Quote:
Originally Posted by 2centsworth
try and explain yourself if you can. wait...let me guess, Iraq?:lolQuote:
Originally Posted by clambake
Massive amounts of cash was created for low-income housing/sub-prime loans. Then, because of deregulation (see glass steagall '33 & Gramm Leach Biley act of '99) , investment banks and insurers perverted those loans into credit default swaps and other derivatives. Now this is where we are today.Quote:
Originally Posted by ChumpDumper
And how do we get out of this?Quote:
Originally Posted by 2centsworth
Or maybe that the recovery was founded on easy money and pyramid schemes with 30-1 cash-to-value leverage on mortgages that in some cases didn't exist and in others were certain to fail. The home equity loans that then came about and allowed people to put electronics and retailers in good positions, etc.... Until it was realized that it was a farce through and through.
You know, a bubble.
Oh, and also, hell yeah, Iraq hurt. Without Iraq, it would have been a hell of a lot less painful to "stimulate" the economy.
Either you are or you aren'tQuote:
Originally Posted by ChumpDumper
But that isn't Bush's fault. It's Obama's that it cost a smooth trillion out of pocket and a couple more on the back end where nobody will see it. :rolleyesQuote:
Originally Posted by kwhitegocubs
What'a a few trill between neocons?
moratorium on captial gains taxes for purchases over the next two years. Aggressive incentives for capital expenditures.Quote:
Originally Posted by ChumpDumper
Foreclosure assistance, slash interest rates, more government spending.
you can't start making stuff up because it sounds good to you. Now if you're talking about investment banks and deregulation I'm with you.Quote:
Originally Posted by kwhitegocubs
so it's a home equity loan crises and not a sub-prime crises?Quote:
The home equity loans that then came about and allowed people to put electronics and retailers in good positions, etc.... Until it was realized that it was a farce through and through.
I just blew a bubble, which one are you talking about.Quote:
You know, a bubble.
really? some would argue wars are stimulative. I bet you made that one up too.Quote:
Oh, and also, hell yeah, Iraq hurt. Without Iraq, it would have been a hell of a lot less painful to "stimulate" the economy.
First, my point was that the fractional reserve rate is 10-1. The credit default swaps were creating value at 30-1. In many cases, they were based on non-real mortgages that were projected to be created. Basically, my point was that sub-prime mortgages themselves would be easy to save or subsidize at some level and that deregulation is far, far, far, far more to blame.
My second point was that home equity went up across the board, even for people who weren't involved in some aspect of the sub-prime/house-flipping market. So this "false" equity was invested in various depreciable assets, propping up retailers (which we are a nation of). That is also pretty much quashed.
To say that the crisis is "just a mortgage crisis" or to over-compartmentalize the nature of the problems inherent in this market collapse is goofy. I wasn't saying it was one or the other, but that there are many factors (often intertwining). Maybe I rambled it all together a bit, but it wasn't totally incoherent as you seem to be making it out to be.
The bubble is multi-part, maybe like a Venn-diagram-bubble. Can't think of a great visual.
Lastly - the Iraq war may have profited some contractors, but there is no way that you can point to our massively increased National Debt, and then look at the war expenditures, and say "yeah that was stimulative"!
it damn sure is a stimulant to the economy, but you have to be in the loop of people that steal you blind.Quote:
Originally Posted by 2centsworth
all the powerful people were cut loose to run free by this administration, yet you imply that obama is the little whisper among speculators.
you know, carrying bush's water is going to be for the long haul.
If that's the case, how do you ever even post to Spurstalk?Quote:
Originally Posted by 2centsworth
Just give everyone who's not a millionaire already, $1 million dollars. The idiots will blow it spurring the economy, the smart ones will pay off debts and invest, both of which having a positive effect on our economy. While also trickling up to the rich that being the business owners, bankers etc.
300,000,000 people multiplied by 1,000,000 is a lot lot lot of zeroes.Quote:
Originally Posted by Heath Ledger
I just made my credit card payment to them, .56 cents. They charge me some bullshit 50 cents every month for some credit monitoring thing. I'd just rather pay the 50 cents plus tax than try to call and fight someone to cancel it. It was my first credit card so I don't want to cancel it, but I stopping using it after I read the book Maxed Out and they gave examples as to how shady of a company Citi is.
Well, 300 Trillion Zimbabwean Dollars would only be slightly less than 20 cents.
Edit: 2 cents.
The rate is 13 Quadrillion New Z$ for One American Dollar. In pre-July 2008 dollars, the rate would be 130 Sextillion Dollars per One American Dollar.
Stop doing and talking about bailouts, and make the markets fix themselves again.Quote:
Originally Posted by ChumpDumper
And how does that happen?Quote:
Originally Posted by Wild Cobra
"MAKE them fix themselves"? No one can make them fix THEMSELVES. That would have already happened right? If they were capable, willing, or comepetent to do so?
I assume, Domesticated Garter, that you simply want the "free market" to fix what the "free market" brought about.
WC sticks his out of his conservative ivory tower, and spews bullshit about free markets being self-policing and self-correcting. :lol
It's been demonstrated over and over that greed driving individuals and organizations is NOT self-correcting, self-limiting. Unregulated greed does not benefit the common good.
eg: greedy fisherman stuffing their boats until fishing populations collapse. And the over-fished fish off New England and off Europe have not "corrected", are still unfishable, 10 years later.
Same with greed driving demand for oil, gas, water. The greed is not sustainable because the resources are not sustainable.
etc, etc, etc.
Unbridled, unregulated greed and self-interest got us into this financial crisis, but that's OK with WC, because if we just hang around long enough, do nothing, the economy will fix itself in x years.
Simply let corporations and unions know they are on their own. If they cannot find a way to survive, too bad. That would apply to the likes of GM. They don’t deserve to survive as a corporate welfare case. Unions need to see that they lose almost all the dues receipts if they do mot work with management to cut costs. Management needs to change some things as well. I see only two big things the government can do for the auto industry. Relax regulations to a reasonable level and reduce corporate tax rates. Did you know that for 2007, GM paid $37.2 billion in taxes, even though they had a $38.7 billion loss! If we do any kind of financial help to the car makers, it should be loans only, and contingent on them presenting a viable model for long term future growth. Otherwise, we are simply throwing the money into the fire.Quote:
Originally Posted by ChumpDumper
In the cases of the banking and lending industry, let them go bankrupt and reorganize if they cannot fix themselves. It's the rich investors that get hurt that way, not the people with loans. Investors lose money all the time. Why should this be any different? All we are doing is bailing out the stock holders. Not the people.
A bailout is rewarding failure. It does not make the industries find corrections that work. All a bailout will do is prolong the pain.
I believe the market in general knows that the bailouts we are doing will hurt the consumer even more than we would be without. I believed we would have a bad economy with either president, indicators have been there for at least a year now. However, I also believe it is compounded by fear of Obama's taxation plans. Because of that, I think the only thing government can do to help the economy is promise no increase in taxes, and even reduce corporate tax rates.
Markets should live and die free. Some entities are dying. Let them.Quote:
Originally Posted by kwhitegocubs
Easy to say when your won job is not on the line.
When are the good times? lolQuote:
Originally Posted by Anti.Hero
Just the cold hard facts. I've been laid off before. When the Semiconductor Indistry took a dump a few years back. I survived, so can others. Again, it's going to happen anyway if the corporate worlddoesn't get fixed. Bailouts will only delay the problem.Quote:
Originally Posted by ChumpDumper
For everone. Did you know the Dow Jones consists of only 30 compaines:
3M
Alcoa
American Express
AT&T
Bank of America
Boeing
Caterpillar
Chevron Corporation
Citigroup
Coca-Cola
DuPont
ExxonMobil
General Electric
General Motors
Hewlett-Packard
Home Depot
Intel
IBM
Johnson & Johnson
JPMorgan Chase
Kraft Foods
McDonald's
Merck
Microsoft
Pfizer
Procter & Gamble
United Technologies Corporation
Verizon Communications
Walmart
Walt Disney
So the other stock indexes are doing great, right?
feel free to show me vato.Quote:
Originally Posted by Cry Havoc
Ah, you and your objective facts...Quote:
Originally Posted by RandomGuy
It's absurd to see people saying nothing about Bush, who has presided over the economy the last eight years, and criticizing Obama, who is two months away from even being sworn in.
Quote:
Originally Posted by Tully365
I'm the one supposedly "criticizing", but what I recommend you and the free-loader do is reread my post.
Sooner or later there has to be a loan, we just can't let them fail...
Quote:
“Directly and indirectly, the economic breadth and contribution of the U.S. automotive industry is deep and far reaching across the country. U.S. automakers directly employ approximately 355,000 American workers and indirectly employ nearly 5 million additional jobs through related industries that are dependent on auto manufacturing, sales, and related activities. Over the last two decades, the automotive industry has invested nearly a quarter of a trillion dollars in the U.S. and is among this country’s top industries for R&D spending. Automakers also are among the largest purchasers of U.S.-manufactured steel, aluminum, iron, copper, plastics, rubber, electronics, and computer chips.”
"...Manufacturing directly employs 14 million America and supports 8 million more.
Each manufacturing job supports as many as four other jobs, providing a boost to local economies. For example, every 100 steel or every 100 auto jobs create between 400 and 500 new jobs in the rest of the economy. This contrasts with the retail sector, where every 100 jobs generate 94 new jobs elsewhere, and the personal and service sectors, where 100 jobs create 147 new jobs.
Well, there are a lot of good, compassionate reasons for picking those three, but if your goal is to save the Middle Class from extinction, then you…
Enact health care reform…to take the burden of wildly-overpriced employer-based health-care off the backs of American business, in order to make them more competitive in the global marketplace.
Enact education reform…because the days of a million high-school drop outs making a Middle Class living pounding anvils and running lathes is over; because the new good jobs (and the prosperity of the nation) depends entirely on a skilled and adaptable labor force.
Pour real money into a green energy portfolio…first, because tethering your manufacturing and distribution systems to a variable like oil which is controlled by hostile foreign powers is suicidal. Second, because somebody’s gonna have to actually man-u-fac-ture the solar cells, fuels cells, windmills and so forth.
To pull us back from the feudal abyss, all these pistons (and more) need to be firing harmoniously in a 21st industrial engine powered by manufacturing.
Yes, the Big Three automakers have been run by short-sighted dolts with ridiculous business models.
So has the financial sector.
So shut up and fix them already..."
Link
an investment in the future yes, but to prolong the inevitable no. I like the Dems plan requiring a business plan.Quote:
Originally Posted by Nbadan
Well, I don't think anybody has been advocating carte blanche loans/balilouts to the automakers. It's just a matter of formulating a way to guarantee that the boundaries any bill would set forth would be reasonably followed.
GM's market cap is only 1.62 Billion, Ford is around 3 Billion - we could easily buy controlling interest in their shares and have control that way if we wanted to. THAT would be real socialism.
those market caps are brutal. Seems to me way too much needs to happen in order for any loan/bailout to be anything more than lifesupport.Quote:
Originally Posted by kwhitegocubs
yep bigger govermentQuote:
Originally Posted by boutons_
want them to change your diaper to?
why can we not let them fail
if a small business is about to file bankrapacy
would you say the same thining?
you do realize david trump filed for money protection several times and now has moneyQuote:
Originally Posted by kwhitegocubs
same thing could happen again
Quote:
Originally Posted by 2centsworth
Quote:
Originally Posted by xrayzebra
Actually, 2centsworth, I wasn't referring to you at all.Quote:
Originally Posted by xrayzebra
Random Guy answered an xrayzebra quote, and I agreed with him. I recommend you reread the thread.
:lolQuote:
Originally Posted by Tully365
Makes it kind of easy to see how conservatives perceive the media to be so biased against them, doesn't it?
By misreading a quote on spurstalk.com?Quote:
Originally Posted by Cry Havoc
"won job"?
Uncertainty sends Citigroup lower
Shares in Citigroup, one of the biggest banks in the US, fell sharply on Friday amid ongoing uncertainty over the company's future.
The stock rose in early trade but later declined 13%, in advance of a board meeting later on Friday.
The Wall Street Journal reported that Citigroup was considering selling parts of the firm. There are also rumours it might merge with another firm
http://news.bbc.co.uk/2/hi/business/7741463.stm
I thought you guys would pick on someone your own size. my bad.Quote:
Originally Posted by Tully365
illogical and a huge stretch. wow, I just defined liberal.:lolQuote:
Originally Posted by Cry Havoc
"how conservatives perceive the media to be so biased against them"
their hate-media is 100% right-wing
There was a study that showed Sunday morning guests were about 55% conservative vs 45% non-conservative.
http://graphics8.nytimes.com/images/...ogoprinter.gifhttp://graphics8.nytimes.com/ads/spacer.gifhttp://graphics8.nytimes.com/ads/fox...erfriendly.gifhttp://graphics8.nytimes.com/adx/ima...0/tw_88x31.gifNovember 23, 2008
The Reckoning
Citigroup Pays for a Rush to Risk
By ERIC DASH and JULIE CRESWELL
“Our job is to set a tone at the top to incent people to do the right thing and to set up safety nets to catch people who make mistakes or do the wrong thing and correct those as quickly as possible. And it is working. It is working.”
Charles O. Prince III, Citigroup’s chief executive, in 2006
In September 2007, with Wall Street confronting a crisis caused by too many souring mortgages, Citigroup executives gathered in a wood-paneled library to assess their own well-being.
There, Citigroup’s chief executive, Charles O. Prince III, learned for the first time that the bank owned about $43 billion in mortgage-related assets. He asked Thomas G. Maheras, who oversaw trading at the bank, whether everything was O.K.
Mr. Maheras told his boss that no big losses were looming, according to people briefed on the meeting who would speak only on the condition that they not be named.
For months, Mr. Maheras’s reassurances to others at Citigroup had quieted internal concerns about the bank’s vulnerabilities. But this time, a risk-management team was dispatched to more rigorously examine Citigroup’s huge mortgage-related holdings. They were too late, however: within several weeks, Citigroup would announce billions of dollars in losses.
Normally, a big bank would never allow the word of just one executive to carry so much weight. Instead, it would have its risk managers aggressively look over any shoulder and guard against trading or lending excesses.
But many Citigroup insiders say the bank’s risk managers never investigated deeply enough. Because of longstanding ties that clouded their judgment, the very people charged with overseeing deal makers eager to increase short-term earnings — and executives’ multimillion-dollar bonuses — failed to rein them in, these insiders say.
Today, Citigroup, once the nation’s largest and mightiest financial institution, has been brought to its knees by more than $65 billion in losses, write-downs for troubled assets and charges to account for future losses. More than half of that amount stems from mortgage-related securities created by Mr. Maheras’s team — the same products Mr. Prince was briefed on during that 2007 meeting.
Citigroup’s stock has plummeted to its lowest price in more than a decade, closing Friday at $3.77. At that price the company is worth just $20.5 billion, down from $244 billion two years ago. Waves of layoffs have accompanied that slide, with about 75,000 jobs already gone or set to disappear from a work force that numbered about 375,000 a year ago.
Burdened by the losses and a crisis of confidence, Citigroup’s future is so uncertain that regulators in New York and Washington held a series of emergency meetings late last week to discuss ways to help the bank right itself.
And as the credit crisis appears to be entering another treacherous phase despite a $700 billion federal bailout, Citigroup’s woes are emblematic of the haphazard management and rush to riches that enveloped all of Wall Street. All across the banking business, easy profits and a booming housing market led many prominent financiers to overlook the dangers they courted.
While much of the damage inflicted on Citigroup and the broader economy was caused by errant, high-octane trading and lax oversight, critics say, blame also reaches into the highest levels at the bank. Earlier this year, the Federal Reserve took the bank to task for poor oversight and risk controls in a report it sent to Citigroup.
The bank’s downfall was years in the making and involved many in its hierarchy, particularly Mr. Prince and Robert E. Rubin, an influential director and senior adviser.
Citigroup insiders and analysts say that Mr. Prince and Mr. Rubin played pivotal roles in the bank’s current woes, by drafting and blessing a strategy that involved taking greater trading risks to expand its business and reap higher profits. Mr. Prince and Mr. Rubin both declined to comment for this article.
When he was Treasury secretary during the Clinton administration, Mr. Rubin helped loosen Depression-era banking regulations that made the creation of Citigroup possible by allowing banks to expand far beyond their traditional role as lenders and permitting them to profit from a variety of financial activities.
During the same period he helped beat back tighter oversight of exotic financial products, a development he had previously said he was helpless to prevent.
And since joining Citigroup in 1999 as a trusted adviser to the bank’s senior executives, Mr. Rubin, who is an economic adviser on the transition team of President-elect Barack Obama, has sat atop a bank that has been roiled by one financial miscue after another.
Citigroup was ensnared in murky financial dealings with the defunct energy company Enron, which drew the attention of federal investigators; it was criticized by law enforcement officials for the role one of its prominent research analysts played during the telecom bubble several years ago; and it found itself in the middle of regulatory violations in Britain and Japan.
For a time, Citigroup’s megabank model paid off handsomely, as it rang up billions in earnings each quarter from credit cards, mortgages, merger advice and trading.
But when Citigroup’s trading machine began churning out billions of dollars in mortgage-related securities, it courted disaster. As it built up that business, it used accounting maneuvers to move billions of dollars of the troubled assets off its books, freeing capital so the bank could grow even larger. Because of pending accounting changes, Citigroup and other banks have been bringing those assets back in-house, raising concerns about a new round of potential losses.
To some, the misery at Citigroup is no surprise. Lynn Turner, a former chief accountant with the Securities and Exchange Commission, said the bank’s balkanized culture and pell-mell management made problems inevitable.
“If you’re an entity of this size,” he said, “if you don’t have controls, if you don’t have the right culture and you don’t have people accountable for the risks that they are taking, you’re Citigroup.”
Questions on Oversight
Though they carry less prestige and are paid less than Wall Street traders and bankers, risk managers can wield significant clout. Their job is to monitor trading floors and inquire about how a bank’s money is being invested, so they can head off potential problems before blow-ups occur. Though risk managers and traders work side by side, they can have an uncomfortable coexistence because the monitors can put a brake on trading.
That is the way it works in theory. But at Citigroup, many say, it was a bit different.
David C. Bushnell was the senior risk officer who, with help from his staff, was supposed to keep an eye on the bank’s bond trading business and its multibillion-dollar portfolio of mortgage-backed securities. Those activities were part of what the bank called its fixed-income business, which Mr. Maheras supervised.
One of Mr. Maheras’s trusted deputies, Randolph H. Barker, helped oversee the huge build-up in mortgage-related securities at Citigroup. But Mr. Bushnell, Mr. Maheras and Mr. Barker were all old friends, having climbed the bank’s corporate ladder together.
It was common in the bank to see Mr. Bushnell waiting patiently — sometimes as long as 45 minutes — outside Mr. Barker’s office so he could drive him home to Short Hills, N.J., where both of their families lived. The two men took occasional fly-fishing trips together; one expedition left them stuck on a lake after their boat ran out of gas.
Because Mr. Bushnell had to monitor traders working for Mr. Barker’s bond desk, their friendship raised eyebrows inside the company among those concerned about its controls.
After all, traders’ livelihoods depended on finding new ways to make money, sometimes using methods that might not be in the bank’s long-term interests. But insufficient boundaries were established in the bank’s fixed-income unit to limit potential conflicts of interest involving Mr. Bushnell and Mr. Barker, people inside the bank say.
Indeed, some at Citigroup say that if traders or bankers wanted to complete a potentially profitable deal, they could sometimes rely on Mr. Barker to convince Mr. Bushnell that it was a risk worth taking.
Risk management “has to be independent, and it wasn’t independent at Citigroup, at least when it came to fixed income,” said one former executive in Mr. Barker’s group who, like many other people interviewed for this article, insisted on anonymity because of pending litigation against the bank or to retain close ties to their colleagues. “We used to say that if we wanted to get a deal done, we needed to convince Randy first because he could get it through.”
Others say that Mr. Bushnell’s friendship with Mr. Maheras may have
presented a similar blind spot.
“Because he has such trust and faith in these guys he has worked with for years, he didn’t ask the right questions,” a former senior Citigroup executive said, referring to Mr. Bushnell.
Mr. Bushnell and Mr. Barker did not return repeated phone calls seeking comment. Mr. Maheras declined to comment.
For some time after Sanford I. Weill, an architect of the merger that created Citigroup a decade ago, took control of Citigroup, he toned down the bank’s bond trading. But in late 2002, Mr. Prince, who had been Mr. Weill’s longtime legal counsel, was put in charge of Citigroup’s corporate and investment bank.
According to a former Citigroup executive, Mr. Prince started putting pressure on Mr. Maheras and others to increase earnings in the bank’s trading operations, particularly in the creation of collateralized debt obligations, or C.D.O.’s — securities that packaged mortgages and other forms of debt into bundles for resale to investors.
Because C.D.O.’s included so many forms of bundled debt, gauging their risk was particularly tricky; some parts of the bundle could be sound, while others were vulnerable to default.
“Chuck Prince going down to the corporate investment bank in late 2002 was the start of that process,” a former Citigroup executive said of the bank’s big C.D.O. push. “Chuck was totally new to the job. He didn’t know a C.D.O. from a grocery list, so he looked for someone for advice and support. That person was Rubin. And Rubin had always been an advocate of being more aggressive in the capital markets arena. He would say, ‘You have to take more risk if you want to earn more.’ ”
It appeared to be a good time for building up Citigroup’s C.D.O. business. As the housing market around the country took flight, the C.D.O. market also grew apace as more and more mortgages were pooled together into newfangled securities.
From 2003 to 2005, Citigroup more than tripled its issuing of C.D.O.’s, to more than $20 billion from $6.28 billion, and Mr. Maheras, Mr. Barker and others on the C.D.O. team helped transform Citigroup into one of the industry’s biggest players. Firms issuing the C.D.O.’s generated fees of 0.4 percent to 2.5 percent of the amount sold — meaning Citigroup made up to $500 million in fees from the business in 2005 alone.
Even as Citigroup’s C.D.O. stake was expanding, its top executives wanted more profits from that business. Yet they were not running a bank that was up to all the challenges it faced, including properly overseeing billions of dollars’ worth of exotic products, according to Citigroup insiders and regulators who later criticized the bank.
When Mr. Prince was put in charge in 2003, he presided over a mess of warring business units and operational holes, particularly in critical areas like risk-management and controls.
“He inherited a gobbledygook of companies that were never integrated, and it was never a priority of the company to invest,” said Meredith A. Whitney, a banking analyst who was one of the company’s early critics. “The businesses didn’t communicate with each other. There were dozens of technology systems and dozens of financial ledgers.”
Problems with trading and banking oversight at Citigroup became so dire that the Federal Reserve took the unusual step of telling the bank it could make no more acquisitions until it put its house in order.
In 2005, stung by regulatory rebukes and unable to follow Mr. Weill’s penchant for expanding Citigroup’s holdings through rapid-fire takeovers, Mr. Prince and his board of directors decided to push even more aggressively into trading and other business that would allow Citigroup to continue expanding the bank internally.
One person who helped push Citigroup along this new path was Mr. Rubin.
Pushing Growth
Robert Rubin has moved seamlessly between Wall Street and Washington. After making his millions as a trader and an executive at Goldman Sachs, he joined the Clinton administration.
Mr. Weill, as Citigroup’s chief, wooed Mr. Rubin to join the bank after Mr. Rubin left Washington. Mr. Weill had been involved in the financial services industry’s lobbying to persuade Washington to loosen its regulatory hold on Wall Street.
As chairman of Citigroup’s executive committee, Mr. Rubin was the bank’s resident sage, advising top executives and serving on the board while, he insisted repeatedly, steering clear of daily management issues.
“By the time I finished at Treasury, I decided I never wanted operating responsibility again,” he said in an interview in April. Asked then whether he had made any mistakes during his tenure at Citigroup, he offered a tentative response.
“I’ve thought a lot about that,” he said. “I honestly don’t know. In hindsight, there are a lot of things we’d do differently. But in the context of the facts as I knew them and my role, I’m inclined to think probably not.”
Besides, he said, it was impossible to get a complete handle on Citigroup’s vulnerabilities unless you dealt with the trades daily.
“There is no way you would know what was going on with a risk book unless you’re directly involved with the trading arena,” he said. “We had highly experienced, highly qualified people running the operation.”
But while Mr. Rubin certainly did not have direct responsibility for a Citigroup unit, he was an architect of the bank’s strategy.
In 2005, as Citigroup began its effort to expand from within, Mr. Rubin peppered his colleagues with questions as they formulated the plan. According to current and former colleagues, he believed that Citigroup was falling behind rivals like Morgan Stanley and Goldman, and he pushed to bulk up the bank’s high-growth fixed-income trading, including the C.D.O. business.
Former colleagues said Mr. Rubin also encouraged Mr. Prince to broaden the bank’s appetite for risk, provided that it also upgraded oversight — though the Federal Reserve later would conclude that the bank’s oversight remained inadequate.
Once the strategy was outlined, Mr. Rubin helped Mr. Prince gain the board’s confidence that it would work.
After that, the bank moved even more aggressively into C.D.O.’s. It added to its trading operations and snagged crucial people from competitors. Bonuses doubled and tripled for C.D.O. traders. Mr. Barker drew pay totaling $15 million to $20 million a year, according to former colleagues, and Mr. Maheras became one of Citigroup’s most highly compensated employees, earning as much as $30 million at the peak — far more than top executives like Mr. Bushnell in the risk-management department.
In December 2005, with Citigroup diving into the C.D.O. business, Mr. Prince assured analysts that all was well at his bank.
“Anything based on human endeavor and certainly any business that involves risk-taking, you’re going to have problems from time to time,” he said. “We will run our business in a way where our credibility and our reputation as an institution with the public and with our regulators will be an asset of the company and not a liability.” :lol
Yet as the bank’s C.D.O. machine accelerated, its risk controls fell further behind, according to former Citigroup traders, and risk managers lacked clear lines of reporting. At one point, for instance, risk managers in the fixed-income division reported to both Mr. Maheras and Mr. Bushnell — setting up a potential conflict because that gave Mr. Maheras influence over employees who were supposed to keep an eye on his traders.
C.D.O.’s were complex, and even experienced managers like Mr. Maheras and Mr. Barker underestimated the risks they posed, according to people with direct knowledge of Citigroup’s business. Because of that, they put blind faith in the passing grades that major credit-rating agencies bestowed on the debt.
While the sheer size of Citigroup’s C.D.O. position caused concern among some around the trading desk, most say they kept their concerns to themselves.
“I just think senior managers got addicted to the revenues and arrogant about the risks they were running,” said one person who worked in the C.D.O. group. “As long as you could grow revenues, you could keep your bonus growing.”
To make matters worse, Citigroup’s risk models never accounted for the possibility of a national housing downturn, this person said, and the prospect that millions of homeowners could default on their mortgages. Such a downturn did come, of course, with disastrous consequences for Citigroup and its rivals on Wall Street.
Even as the first shock waves of the subprime mortgage crisis hit Bear Stearns in June 2007, Citigroup’s top executives expressed few concerns about their bank’s exposure to mortgage-linked securities.
In fact, when examiners from the Securities and Exchange Commission began scrutinizing Citigroup’s subprime mortgage holdings after Bear Stearns’s problems surfaced, the bank told them that the probability of those mortgages defaulting was so tiny that they excluded them from their risk analysis, according to a person briefed on the discussion who would speak only without being named.
Later that summer, when the credit markets began seizing up and values of various C.D.O.’s began to plummet, Mr. Maheras, Mr. Barker and Mr. Bushnell participated in a meeting to review Citigroup’s exposure.
The slice of mortgage-related securities held by Citigroup was “viewed by the rating agencies to have an extremely low probability of default (less than .01%),” according to Citigroup slides used at the meeting and reviewed by The New York Times.
Around the same time, Mr. Maheras continued to assure his colleagues that the bank “would never lose a penny,” according to an executive who spoke to him.
In mid-September 2007, Mr. Prince convened the meeting in the small library outside his office to gauge Citigroup’s exposure.
Mr. Maheras assured the group, which included Mr. Rubin and Mr. Bushnell, that Citigroup’s C.D.O. position was safe. Mr. Prince had never questioned the ballooning portfolio before this because no one, including Mr. Maheras and Mr. Bushnell, had warned him.
But as the subprime market plunged further, Citigroup’s position became more dire — even though the firm held onto the belief that its C.D.O.’s were safe.
On Oct. 1, it warned investors that it would write off $1.3 billion in subprime mortgage-related assets. But of the $43 billion in C.D.O.’s it had on its books, it wrote off only about $95 million, according to a person briefed on the situation.
Soon, however, C.D.O. prices began to collapse. Credit-rating agencies downgraded C.D.O.’s, threatening Citigroup’s stockpile. A week later, Merrill Lynch aggressively marked down similar securities, forcing other banks to face reality.
By early November, Citigroup’s anticipated write-downs ballooned to $8 billion to $11 billion. Mr. Barker and Mr. Maheras lost their jobs, as Mr. Bushnell did later on. And on Nov. 4, Mr. Prince told the board that he, too, would resign.
Although Mr. Prince received no severance, he walked away with Citigroup stock valued then at $68 million — along with a cash bonus of about $12.5 million for 2007.
Putting Out Fires
Mr. Prince was replaced last December by Vikram S. Pandit, a former money manager and investment banker whom Mr. Rubin had earlier recruited in a senior role. Since becoming chief executive, Mr. Pandit has been scrambling to put out fires and repair Citigroup’s deficient risk-management systems.
Earlier this year, Federal Reserve examiners quietly presented the bank with a scathing review of its risk-management practices, according to people briefed on the situation.
Citigroup executives responded with a 25-page single-spaced memo outlining a sweeping overhaul of the bank’s risk management.
In May, Brian Leach, Citigroup’s new chief risk officer, told analysts that his bank had greatly improved oversight and installed several new risk managers. He said he wanted to ensure “that Citi takes the lessons learned from recent events and makes critical enhancements to its risk management frameworks. A change in culture is required at Citi.”
Meanwhile, regulators have criticized the banking industry as a whole for relying on outsiders — in particular the ratings agencies — to help them gauge the risk of their investments.
“There is really no excuse for institutions that specialize in credit risk assessment, like large commercial banks, to rely solely on credit ratings in assessing credit risk,” John C. Dugan, the head of the Office of the Comptroller of the Currency, the chief federal bank regulator, said in a speech earlier this year.
But he noted that what caused the largest problem for some banks was that they retained dangerously big positions in certain securities — like C.D.O.’s — rather than selling them off to other investors.
“What most differentiated the companies sustaining the biggest losses from the rest was their willingness to hold exceptionally large positions on their balance sheets which, in turn, led to exceptionally large losses,” he said.
( So the strategy should have been to sucker investors into buying Citi's shit? :lol Other org's have already been forced to buy back the sh!t they oversold to investors. )
Mr. Dugan did not mention any specific bank by name, but Citigroup is the largest player in the C.D.O. business of any bank the comptroller regulates.
For his part, Mr. Pandit faces the twin challenge of rebuilding investor confidence while trying to fix the company’s myriad problems.
Citigroup has suffered four consecutive quarters of multibillion-dollar losses as it has written down billions of dollars of the mortgage-related assets it held on its books.
But investors worry there is still more to come, and some board members have raised doubts about Mr. Pandit’s leadership, according to people briefed on the situation.
Citigroup still holds $20 billion of mortgage-linked securities on its books, the bulk of which have been marked down to between 21 cents and 41 cents on the dollar. It has billions of dollars of giant buyout and corporate loans. And it also faces a potential flood of losses on auto, mortgage and credit card loans as the global economy plunges into a recession.
Also, hundreds of billions of dollars in dubious assets that Citigroup held off its balance sheet is now starting to be moved back onto its books, setting off yet another potential problem.
( Holy shit is gonna hit the fan! )
The bank has already put more than $55 billion in assets back on its balance sheet. It now says an added $122 billion of assets related to credit cards and possibly billions of dollars of other assets will probably come back on the books.
Even though Citigroup executives insist that the bank can ride out its current difficulties, and that the repatriated assets pose no threat, investors have their doubts. Because analysts do not have a complete grip on the quality of those assets, they are warning that Citigroup may have to set aside billions of dollars to guard against losses.
In fact, some analysts say they believe that the $25 billion that the federal government invested in Citigroup this fall might not be enough to stabilize it.
Others say the fact that such huge amounts have yet to steady the bank is a reflection of the severe damage caused by Citigroup’s appetites.
“They pushed to get earnings, but in doing so, they took on more risk than they probably should have if they are going to be, in the end, a bank subject to regulatory controls,” said Roy Smith, a professor at the Stern School of Business at New York University. “Safe and soundness has to be no less important than growth and profits but that was subordinated by these guys.”
============
So in order to enrich the mgmt by 100s of $Ms, bad risks/bets were taken. The mgmt pocketed their $Ms, quit Citi, and now taxpayers try to pick up the pieces. Ain't free-market capitalism a great system? :lol
maybe they can take my two credit card bills with them.......fuck off all you credit card fuckers.
Link?Quote:
Originally Posted by boutons_
http://biz.yahoo.com/ap/081124/citigroup.html
Where was this when WaMu went down? And I wouldn't mind things like this as much if the government forced Citi to move it's offshore call center jobs back to the US.
Where are the Repugs and conservative shills in here telling us the financial crisis is the fault of the poor people, ACORN, and F & F, and the Dems? :lol
Oh, I totally understand why we the taxpayer should be bailing out financial institutions...I mean, think of all the things they produce!
Why, were would our economy be without the people whose sole role in life is shuffling paper and deciding where money goes! Think of all the job loss!
This country is so fucking pathetic.
Pure financial crony capitalism, using taxpayers' capital.
BumP!!Quote:
Originally Posted by 2centsworth
Enjoy the inflation mi amigos!
since you're retarded I'll explain it to you. Look at the date of the post and you'll see up to that point Obama had said zero about the market except for the campaign rhetoric. After the date of my post, Obama came out to say he would NOT RAISE TAXES and let them expire in 2010.Quote:
Originally Posted by clambake
Are you really this dumb?
thats not at all what you were doing. you are an alarmist little bitch that's trying to directly relate the market fall based on a dipshit candidate selection.Quote:
Originally Posted by 2centsworth
you failed, as usual.
your lack of reading comprehension is appalling.Quote:
Originally Posted by clambake
i read it just fine.
Quote:
Originally Posted by 2centsworth
so you really are this dumb.:lolQuote:
Originally Posted by clambake
:lol i thought you'd like that!Quote:
Originally Posted by 2centsworth
Happy Holidays!
:dizzyQuote:
Originally Posted by clambake
one day I'll put my finger on the gene shared by libs, gays and mavs fans.
no you won't. you're inbred.
weak sauce.
why do all the fag bashers obsess over sauce?Quote:
Originally Posted by 2centsworth