Citi is about to exit TARP and all is well in the world. A few
headlines to that effect:
Citi itself is pushing the notion that it is about to cross a big threshold:
This overview of the transaction comes from the red herring on Citi’s big secondary:
The dollar value of the “remaining equity stake” is $25 billion. There
is no certainty that this amount can be paid back in the “6-12” months
indicated in the prospectus.
Citi is not out of TARP. Those headlines were wrong. They will be out
of TARP when they have repaid all of what is owed. If Citi receives the
benefits of ‘being out of TARP’ before it is actually out of TARP the
process will have been subverted.
A question: Were there others (like me) who misunderstood the recent announcements regarding Citi’s changing status?
...and other Obama celebratory statements like, "we've gotten back 60 % of the money plus interest..." who stops to count what exactly 40% represents and that it is in a black hole captured by the Fed cartel...
the mainstreet media is shoveling S@#$onto the everyday man right now trying to convince them what a great thing that paulson and bernake robbed the taxpayers for the US to enrich the fed cartel...and the everyday man knows it is S@#$ but, stuck in their world of helplessness and cognitive dissonance about what to do now that it is so very obvious that we live in a banana republic.
CITI(C) group is big in India, thats the word on the street anyways. A bunch of businessmen from India are going to gobble up all the shares of the offering to get in on the ground level. I agree with Cramer and would buy Citi at $3.00 where it will bottom out after the offering... I give you pure gold...http://www.pitbulltrading.blogspot.com
One of the excuses Bernanke claimed for rescuing Citi was that he couldn't close a bank that was so worldwide, meaning he didn't have jurisdiction. They should be required to divest themselves of their foreign operations that place them beyond the reach of the US or they should give up their deposit insurance. To engage in worldwide moral hazard under the protection of the FDIC is criminal.
ZH,
now look what you made me have to do. my vid mash-up from 1 year ago got a respectable 3,300 hits. Not bad for something about banking!!!
notice the Off Balance sheet items? Needs a complete re-edit.
http://www.youtube.com/watch?v=pPfbXFf4g2k
...
Oddly, I remember having a long chat with Pandit years back at Columbia B School, can't remember the event but he was with a few other bankers and engaged in a 'wise guy' debate with me, one of the little people.
...
here's another Citicorp Leech line-up vid mash:
http://www.youtube.com/watch?v=7IUaqZykJ4I
Did you try and go to the SIGTARP website to see if there is any disclosure on the proposed transaction?
http://www.sigtarp.gov/
You see we are in the banker gray area, where repaying refers to a single specific remaining origination. Repaying a portion of the backstops are not necessarily making the tax payer whole.
Most honest people assume that being paid back implies, being paid back in full for all obligations. Because how can it be that you can use tax payer funds, however issued, without any oversight?
Mark Beck
Many more reamings like this are needed before the politicians stop handing out favors to the banks
http://market-ticker.denninger.net/archives/1732-Dylan-Ratigan-Reams-Ed-...
It seems that the majority of you are confused because you are not distinguishing TARP from other aid provided. It is TARP that has been conditionally tied to oversight constraints (such as compensation), whereas the other aid packages are virtually freebies (grants/gifts in many cases) to the recipients - such as some of the loss guarantees on toxic assets. TARP is being overplayed here. Capital requirements are about to tighten many IB-like activities. That's why I stated before: that GS better be putting away a lot of bonus reserve because it is going to be tough to come by from here on, let alone come at all. The real story here is post-TARP requirements. The good news is that private capital is replacing the government provisions. The bad news is that things are a long way from getting better. But this was a planned path - and I give them credit for sticking to plan.
As I also said before: if you don't want to fight the market, go long the broad indices and short the financials. My choice? Just short the financials as they go into greater negative territory than the broader market goes up.
BreakingNews In deal with IRS, Citigroup gets to keep $38 billion in tax breaks--Washington Post http://bit.ly/6rNQa9 5 minutes ago
oh well 10.00 easy
Just out
Oh by the way Citibank is not repaying TARP. We are actually paying them since we are allowing them not to pay 38 Billion in taxes this year..I feel a tar and feathering coming
http://www.washingtonpost.com/wp-dyn/content/article/2009/12/15/AR2009121504534.html?hpid=topnews
Oh by the way. Just out from the Washington Post..Citibank is not paying TARP back really. They are just not paying 38 Billion in taxes owed to us this year.
I feel a tar & feathering coming on .
http://www.washingtonpost.com/wp-dyn/content/article/2009/12/15/AR200912...
Exactly! They are getting almost $40billion in tax breaks. It's an early Christmas for Citi courtesy of the govt. And I thought tax payers were actually going to gain some $14 billion as this video says: http://tiny.cc/TaJx9
The part nobody seems to understand or chooses to overlook is Citi issued $7.1 billion trust preferred securities in addition to the $20 billion to secure the Loss sharing agreement on the $300 billion of assets. They are only canceling $1.8 billion leaving the government holding $5.3 billion in trust preferred securities issued under the Tarp program.
So tax payers will own 6ish billion common shares and $5.3 billion in trust preferred securities and still declare Citi out from under Tarp.
Steve Liesman said that TARP was being payed back, so it has to be true! And if it isn't, well... just rally another 200 points anyways.
I'm not the smartest guy in the world but that is all that I could think as well...citi is not out of TARP, they still owe a boatload.
An epic failure, once again, from the media.
this is just a setup, for tarp II. if they paid us back, last time, they must be good for it this time. tarp II= twice as much money
TARP II would generate mass riots. Not that we don't already have TALF/TANF/PPIP/WTF....
Who in their right mind would buy all the worthless paper? If your guess is "The Fed", I am thinking you are right. Watch this graph go even higher now (http://research.stlouisfed.org/fred2/series/WSECOUT)
Count me as a "misunderstander" too, Bruce.
All I really understand is that the TARP Banksters are moving on to Confidence Play II, which requires issuing more shares to raise a mountain of capital they'll need to offset a tsunami of losses in '10. Can't be done without shaking off Uncle Sugar.....even when they don't really.
And I likewise understand they want to loot as much bonus money as possible.... whether they succeed raising private capital or not.
The dollar value of the “remaining equity stake” is $25 billion. There is no certainty that this amount can be paid back in the “6-12” months indicated in the prospectus.
Citi is not out of TARP. Those headlines were wrong. They will be out of TARP when they have repaid all of what is owed.
It doesn't appear that you understand what is going on. Citi doesn't have to "pay back" the remaining $25 billion. The government converted $25 billion of preferred stock into Citi common at a little over $3/share for the common (when it was trading at less than half that). The government now intends to sell its Citi shares over the next 6-12 months. It may come to more or less than $25 billion but Citi isn't on the hook for a shortfall if there is one.
GM had a similar headline recently.
They will pay back their loan ($6+Bn, I think) in full. The kicker is that gov't still owns 60% of the company and those 50 or 60 $Bn are NOT being repaid any time soon.
It's like there's a coordinated msg to give superficial people a feeling that the bailout is complete and successful. Don't know why, there's no imminent election :)
Or could it be the UST is desparately raising cash to avoid a default while waiting on Congress to piss off 99% of the electorate by raising the debt ceiling again?
Thanks for this clarification. Just a question. If some black swan comes up the river (again) are the tax payers assured over getting their money back? By my definition Citi is not out of TARP until the Treasury gets its money back. In full.
If the problems with sovereign borrowers explode next year the global banks (aka C) will become suspect again. In that climate the stock goes to $2.50. Do you really think Treasury is going to sell common in this amount in that enviroment? I would hope not.
I want my money back. Paid in full. Before they go off and do something silly again.
You can define whether Citi is out of TARP or not however you like, but the taxpayers aren't guaranteed a particular outcome on the sale of the equity stake in Citi. One of the criticisms of Treasury in the first report by Elizabeth Warren's committee was that they didn't push for the best deals for taxpayers. Had Treasury converted the preferred into Citi common based on the common price at the time (less than $1.50 per share IIRC), the government would have had considerably more than a 50% ownership stake. But Treasury didn't want to be seen as controlling a bank via a majority ownership position so they essentially negotiated for fewer shares, believe it or not. At the time of conversion, I believe they swapped the preferred they had taken back for $25 billion into around $10 billion of common stock based on what it was trading for then. And this was only a couple of months or less after they'd put in the $25 billion.
In my view, anytime Treasury injected money into any company it should have been in the senior-most creditor position. They put $2 billion into CIT preferred stock when bankruptcy was a strong possibility and there were no other lenders and when CIT went bankrupt less than 2 months later, taxpayers lost the entire investment while senior creditors got $.70 on the dollar.
One of the conditions of these banks who wanted to repay TARP should have been that if they ever have to come to the taxpayer for money again, existing management will be out with no severance and any taxpayer cash into the banks will be senior to all creditors and trigger a reorganization.
Citi took $25 b. And gave UST some paper shares in return. If they were repaying their TARP funds, they could buy it back from UST. Instead UST will go the market to sell the dilution to new suckers.
1) The Fed guarantee of $306B of Citi's toxic mortgages to illegals for Florida investment condos remains in place
2) The FDIC still guarantees all new Citi debt.
Give me these guarantees and I could pay back $50B.
Remove these, C is immediately insolvent.
"Out of the woods"? That's pretty funny. This is looting of the US treasury, pure and simple.
Consider this...the FDIC does not insure 100% of mom and pop bank deposits, but does insure 100% of C and BAC debt issues.