Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Strategies & Market Trends : The Residential Real Estate Crash Index -- Ignore unavailable to you. Want to Upgrade?

To: geode00 who wrote (189690)	3/10/2009 4:29:37 AM
From: stockman_scott	Respond to of 306849

The issue is not protecting bank shareholders dailykos.com They have already been wiped out -- Citi's stock has gone from 55 a share to penny stock value. No the real issue is whether or not bank bondholders, otherwise known as creditors, will take a hit or not, and if so, who and how much. The reason this is a sticking point is that the only way this credit crisis is going to ease is for the major bank's balance sheets to improve to loosen up their credit lending practices (and for other banks and lending institutions not to be so wary of other institutions to whom they lend). To do that someone is going to have to swallow the toxic mortgage derivative assets that are drowning the bank's sheets in red. Taxpayers can do it or the bank's bondholders can (or at least put in a share with the taxpayers). The easy solution is to make the bank's creditors take the majority of the hit, but the problem is that many of these bank's creditors are themselves banks so if they take the hit that will only hurt their balance sheets and the credit crisis simply gets ping ponged and not solved. And no nationalization does nothing to answer this question it simply puts the government in charge of the bank where it can finally make that decision (the default of pumping money into these failed banks and making them zombies effectively makes the taxpayers foot the entire bill without any ownership right or stake in the bank). It must be done if for no other reason as it finally gives the taxpayers some control and marginal upside on their "purchase" of the failed bank with its failed toxic assets. Finally, regardless of what is done the taxpayers will have to pay more than they have done already. Given the stakes and the public's fatigue with this "rot at the top", I would favor the bondholders taking some haircut but not as big as would be the case in a traditional bankruptcy. by True Independent on Mon Mar 09, 2009 at 10:21:54 PM PDT

To: geode00 who wrote (189690)	3/10/2009 6:15:10 AM
From: stockman_scott	Read Replies (3) \| Respond to of 306849

Citigroup Chief Pandit Says Bank Having Best Quarter Since 2007 By Edward Evans March 10 (Bloomberg) -- Citigroup Inc. Chief Executive Officer Vikram Pandit said his bank is having the best quarter since 2007, when it last posted a profit. “I am most encouraged with the strength of our business so far in 2009,” Pandit wrote in an internal memorandum obtained today by Bloomberg. “In fact, we are profitable through the first two months of 2009 and are having our best quarter-to-date performance since the third quarter of 2007.” The bank had $19 billion of revenue in January and February before disclosed writedowns, he added. Citigroup has logged five quarters of losses totaling more than $37.5 billion since it posted a $2.2 billion profit in the third quarter of 2007. Once the world’s biggest bank by market value, the bank fell below $1 in New York trading last week for the first time as investors lost confidence that the shares can recover after losses and a government rescue. “I am, like you, disappointed with our current stock price and the broad-based misperceptions about our company and its financial position,” Pandit wrote. The price doesn’t reflect the bank’s capital strength and earnings potential, he added. Citigroup jumped 14 percent to $1.20 in German trading today. The stock has tumbled 95 percent in the past year, cutting the bank’s market value to about $5.8 billion, less than Japan’s Nomura Holdings Inc. and Turkey’s Akbank TAS, in which Citigroup owns a 20 percent stake. The bank is the smallest company and the worst-performing stock in the 30-member Dow Jones Industrial Average. Biggest Shareholder The government’s plan to exchange its preferred stock for common shares will make Citigroup the strongest U.S. bank measured on tangible common equity, Pandit added. The transaction will also make the government Citigroup’s biggest shareholder, with a 36 percent stake. The bank has also conducted its own stress tests, using assumptions more pessimistic that the Federal Reserve’s, Pandit added. Citigroup is “confident” about its capital strength. Expenses totaled $8.1 billion in the year through February, less than Citigroup’s target, Pandit said. The bank was created by the 1998 combination of Citicorp and Travelers Group Inc., which with a value of $85 billion was the largest merger in history at the time. The transaction helped persuade the U.S. government to repeal a Great Depression-era law, the Glass-Steagall Act, that prohibited banks that took consumer deposits from engaging in investment-banking activities. To contact the reporter on this story: Edward Evans in London at at eevans3@bloomberg.net Last Updated: March 10, 2009 05:39 EDT