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Can I have a loan and an equity investment to allow me to boost my bonuses to about $20 million?
From Bloomberg, Citigroup Stock Sale Discount Prompts Treasury to Delay Disposal of Stake :
Dec. 17 (Bloomberg) -- Citigroup Inc.,
the last of the four largest U.S. banks to seek funds to exit a
taxpayer bailout, raised $17 billion by selling stock for a price so
low that the U.S. delayed plans to shrink its one-third stake in the
lender.Citigroup sold 5.4 billion shares at
$3.15 apiece, less than the $3.25 the government paid when it acquired
its stake in September. The New York-based bank said the Treasury won’t
sell any of its shares for at least 90 days.Investors demanded a bigger discount from Citigroup than Bank of America Corp. or Wells Fargo & Co.,
which together raised more than $31 billion this month to exit the
Troubled Asset Relief Program. Wells Fargo, which trumped Citigroup’s
bid to buy Wachovia Corp. last year, leapfrogged its rival by
completing a $12.25 billion share sale Dec. 15. JPMorgan Chase &
Co. repaid $25 billion in June.“The market cast its vote and they’re low down on the ballot,” said Douglas Ciocca,
a managing director at Renaissance Financial Corp. in Leawood, Kansas.
“Citigroup needs to show steps to reinstall the quality of the brand.”With
the sale, Citigroup’s common shares outstanding increased to 28.3
billion. That’s up from 22.9 billion as of Sept. 30 and 5 billion at
the end of 2007.“More shares outstanding means less value per share,” said Edward Najarian,
an analyst at International Strategy and Investment Group in New York,
who has a “hold” rating on the shares. “The whole structure of their
deal to pay back TARP wasn’t very good for common shareholders and that
is being reflected in the pricing.”
I think
one of the most important points are being missed. Most of these banks
swore that they didn't need TARP. Despite this, in order to return it,
they must go back out to the capital markets. Why do you have to hit
the market to return a loan that you said you didn't need, unless you
needed it? This obvious lie has went unchallenged.
It gets
worse. Citi is diluting the hell out of it shareholders, as well as all
of the other TARP banks that are selling shares. Some may even be
taking on debt. They are doing this primarily to gain the freedom to
declare bonuses at higher rates despite uncertain credit condition
surrounding the toxic assets that caused the problem in the first
place. Why in the world would any lender or shareholder agree to
dilution and/or higher debt service "primarily" to pay higher bonuses
to employees in the highest compensated (as a percent of net revenue)
industry in the world???
Imagine if you ran this business, you
have rocky times during a recession with revenues in nearly all aspects
of your business down save the blatant risk taking of trading, and you
go to your bank and say I need a big loan so I can pay myself a $20
million bonus increase.
Do you think Citibank would give you this
loan? They expect it from their shareholders. The same goes for
Goldman, JPM, BAC, etc.
Also from Bloomberg: Weak Banks Should Face Curbs on Bonuses, Dividends, Basel Regulator Says
Dec. 17 (Bloomberg) -- Global regulators urged national
authorities to limit bonus and dividend payments by banks with
weakened capital safety nets as part of proposals to reduce
risks to the financial system.Banks should increase the quality of the capital they hold
to cope with losses, the Basel Committee on Banking Supervision
said in a report on bank capital and liquidity published today.
Banks with depleted capital buffers shouldn’t use predictions of
recovery to justify generous dividends to investors and
employees, the committee said.Global regulators have been wrestling with plans to
increase supervision of banks following the worst economic
crisis since World War II. The Group of 20 Nations agreed in
April that banks should be required to hold more and better
quality capital to reduce risks to the financial system.“It’s not acceptable for banks which have depleted their
capital buffers to try and use the distribution of capital as a
way to signal their financial strength,” the committee’s
statement said. “The proposed framework will reduce the
discretion of banks which have depleted their capital buffers to
further reduce them through generous distributions of
earnings.”
It's amazing that this even needs to be said.
Isn't this similar to what the hedge funds were doing during the boom? Load good companies up on tons of HY debt and take "fees" and other payments that more than offset their supposed equity and then they don't care what happens. They pay themselves the big bonuses and someone else deals with the mess when it falls apart. Covenant light loans re-vamped as equity dilution. Who are the idiots that keep buying this junk?
last ditch efforts to grab all you can before primary 3 unfolds
Failure to liquidate the insolvent banksters, failure to implement real insurance, and more importantly entitlement, reform, failure to end the madness of foreign adventurism, is a failure of the tough over the easy and the truth over the specious.
Notwithstanding the claim of that silly television show, most folks do not lie. They are good, reasonable and honest. That is why the Big Lie works. It is so very difficult for them to process that the truths that they hold to be most dear are lies told to them by liars. They just can't grasp the delusion that those in a place of power and privilege have been captured by, a mindset that feeds them the pablum narrative that the ends justify the means.
The cold hard fact of our age is that the bankrupt ideology of the rich that had greatly succeeded in drafting the inner monologue of regular folks so that they would vote against their self-interests is colliding head-on with a Mr. Market that is a bit pissed off that we've inflated it out of the business cycle for the last quarter century.
Reality is the tail risk and payback is a bitch.
"This obvious lie has went unchallenged."... I think I'll challenge your lie.. actually likely not a lie but an untruth [there is a difference!] :)
I think you fail to take into account the fact that the Feds have raised the Tier 1 capital requirements on the major banks significantly.
Regards,
Michael
why are they doing this?
Because they know the ride is over and paying out those amounts in bonus represents the last great grab.
MS
exactly, then they will disguise like women and try to hop on the life boats.
Brilliant insight!
great contrarian logic. 2+2 still = 4
Why? Because shareholders have no way to stop them.
Why? Because the Board is desperate to grab all they can before the bottom falls out. They'r the characters on the Titanic that step over the women and children to get in the lifeboats.
Why? Because they can.
You forgot one: Why? Because Sage Cramer has a buy recommendation on C.
the whole schmorg is so pathetic ...
technical question for the cognoscenti
$XAU, GDX, GDXJ, SVL, $HUI, GLD ASA dropped several points before the open.
who's trading them ... where, what market?
"It's amazing that this even needs to be said."
This is how the Ponzi keeps going and going. Basic faulty premises are endlessly repeated without examination or serious discussion. Once you acknowledge the crazy aunt in the attic, everything else is suddenly open for (re)examination. This is not what the banks, other corporations, the Fed and the government want.
The Big Lie requires lots of small little lies for support. Once that small trickle of water begins to undermine the dam, it's days are numbered if nothing is done. The powers that be know that if they allow the trickle to begin, the torrent and ultimate failure is not far behind.
LOL. Ya why fix the crazy aunt in the attic. The paper insulates and muffles the murmers and screams!! Ok. It was looking a little crazy when it cost 1.4 billion dollars to coin 1 billion worth of pennies. But a blizzard of paper will fix it. Let the HUSH money flow till the crazy aunt is silenced. LOL