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Citi Fails Fed Stress Test … The REAL Story

George Washington's picture




 

Bloomberg reports that Citigroup has failed the Fed’s new round of stress tests:

Citigroup Inc.’s capital plan was among five that failed Federal Reserve stress tests, while Goldman Sachs Group Inc. and Bank of America Corp. passed only after reducing their requests for buybacks and dividends.

 

Citigroup, as well as U.S. units of Royal Bank of Scotland Group Plc, HSBC Holdings Plc and Banco Santander SA, failed because of qualitative concerns about their processes, the Fed said today in a statement. Zions Bancorporation was rejected as its capital fell below the minimum required. The central bank approved plans for 25 banks.

In reality, Citi "flat lined" - went totally bust - in 2008.  It was insolvent.

And former FDIC chief Sheila Bair said that the whole bailout thing was really focused on bringing a very dead Citi back from the grave.

Indeed, the big banks - including Citi - have repeatedly gone bankrupt.

For example, the New York Times wrote in 2009:

Over the past 80 years, the United States government has engineered not one, not two, not three, but at least four rescues of the institution now known as Citigroup.

So why did the U.S. government give Citi a passing grade in previous stress tests?

Because they were rigged to give all of the students an "A".

Time Magazine called then Secretary Treasury Tim Geithner a “con man” and the stress tests a “confidence game” because those tests were so inaccurate.

But the bigger story is that absolutely nothing was done to address the causes of the 2008 financial crisis, or to fix the system:

  • The faulty incentive system - huge bonuses that encourage reckless risk-taking by bankers - are still here
  • Another big problem - shadow banking - has only gotten worse

Indeed, the only the government has done is to try to cover up the problems that created the 2008 crisis in the first place ... and to throw huge amounts of money at the fattest of the fatcats.

Remember, Nobel prize winning economist George Akerlof has demonstrated that failure to punish white collar criminals – and instead bailing them out- creates incentives for more economic crimes and further destruction of the economy in the future.

Indeed, professor of law and economics (and chief S&L prosecutor) William Black notes that we’ve known of this dynamic for “hundreds of years”.  (Actually, the government has ignored several thousand years of economic wisdom.)

Heck of a job, guys ...

 

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Thu, 03/27/2014 - 12:59 | 4599141 Notsobadwlad
Notsobadwlad's picture

The key learning is that the entire system is built on fraud and lies and the fraud and lies must be maintained to continue the system.

AND: at any time the powers running the TBTF banks and ONLY those powers (presently) have the ability to pull down the system at their whim.

If the system continues we know why. If the system fails then we know why and who did it, as well. It will not be a random and unforeseeable act. Black swans are planned.

Thu, 03/27/2014 - 12:39 | 4599044 Watch Bird 1
Watch Bird 1's picture

hmmm. think about..identity of Citi's largest shareholder. might there be dots to connect?

Thu, 03/27/2014 - 12:30 | 4599005 waterhorse
waterhorse's picture

Time Magazine called then Secretary Treasury Tim Geithner a “con man” and the stress tests a “confidence game” because those tests were so inaccurate."

But, but, but Turbo Tax was just foaming the runways for the banks!  He's a national 'hero'.  So unappreciated...

/s

Thu, 03/27/2014 - 12:25 | 4598982 waterhorse
waterhorse's picture

TFTTF - Too Fucking Toxic To Fail

Thu, 03/27/2014 - 12:23 | 4598975 metastar
metastar's picture

I.T. worker I know that work at insolvent shitiSkank get paid well more than others I know at profitable businesses. It is sad to think that their Mc Mansions and lavish lifestyles are subsidized at our expense. It is an outrage, ... More spit in our faces.

Thu, 03/27/2014 - 12:00 | 4598861 oklaboy
oklaboy's picture

nothng to see here, move on

Thu, 03/27/2014 - 11:37 | 4598709 kurt
kurt's picture

Hell of a job brown eye

...ca caint get fooled again...

terr

homeland

freedoms

yellow cake

Thu, 03/27/2014 - 12:01 | 4598867 eclectic syncretist
eclectic syncretist's picture

Perhaps Mr. Washington should read some more history until he realizes that the Federal Reserve was created by the "TBTF" banksters in order to allow them to fail and be bailed out repeatedly, all to be paid for by taxpayers.  This is the true purpose of the Fed, anything else they or anyone else claims is mistaken untruth or outright lies.  What the Fed has done up to this very day is exactly what it was intended to do from the very beginning.

Also, repeatedly and exclusively referencing yourself is not the best way to increase your credibility and perceived legitimacy.  Beyond that I love your stuff.  Thanks.

Thu, 03/27/2014 - 12:24 | 4598978 kurt
kurt's picture

Thanks G man.

Thu, 03/27/2014 - 10:49 | 4598451 bigkahuna
bigkahuna's picture

We've failed to govern ourselves - whats next I wonder?

Thu, 03/27/2014 - 10:30 | 4598357 the grateful un...
the grateful unemployed's picture

Citi has an international retail banking business, but Goldman has FDIC.

Thu, 03/27/2014 - 10:19 | 4598311 Reaper
Reaper's picture

Our noble elite government and its noble bankers will first save themselves and promise to then save us.

Thu, 03/27/2014 - 10:02 | 4598236 elwind45
elwind45's picture

WHAT INNING OF THE CRISIS IS IT NOW anyone?

Thu, 03/27/2014 - 10:26 | 4598339 koncaswatch
koncaswatch's picture

13th    We're goin' for a record extra inning game.

Thu, 03/27/2014 - 09:43 | 4598148 elwind45
elwind45's picture

The Fed forced the remaining banks into TBTF? The Friday night meeting was about convincing the still "solvent" bankers to pickup the fallen or the gov. Could not bailout both? None of the PRE-TBTF banks wanted anything to do with the rotten eggs but was offered help to consolidate or else face a system wide failure? TBTF. Was about stuffing collateral down bankers throats and not anything about JOHN Q. Ever? The duel mandate was a ploy to show Fed cared but was powerless to stop CORP. from laying everyone off because of a fraud crisis reported as a bank problem!

Thu, 03/27/2014 - 09:09 | 4598048 ebworthen
ebworthen's picture

Heroin dealers love it when one of their junkies is jones'ing!

"You're not better yet, here, have some more - this should help."

Thu, 03/27/2014 - 10:45 | 4598429 Dewey Cheatum Howe
Dewey Cheatum Howe's picture

Or my favorite non-alcoholic beer (which actually has alcohol in it). Here you go recovering addict just a constant reminder we are here and helping you by keeping you just slightly hooked until you are ready to revert back to your old ways. But we care about you and want to sell you non-alcoholic beer to help you kick your alcoholism after we've been profiting on your problem in the first place.

Thu, 03/27/2014 - 08:59 | 4598018 rsnoble
rsnoble's picture

The past 80years?  A solid track record. LOL.  

Kinda reminds me of a couple idiots I know that paid $500 to study for a block test and were given all the answers and couldn't build a dog house if they had to.

Thu, 03/27/2014 - 08:08 | 4597858 lakecity55
lakecity55's picture

We've drilled Too Deep, men! Run! She's gonna blow!

Thu, 03/27/2014 - 09:14 | 4598072 krispkritter
krispkritter's picture

Good Lord I hope you're not referring to the pic above...Where's the brain bleach!

Thu, 03/27/2014 - 03:47 | 4597614 williambanzai7
williambanzai7's picture

Thu, 03/27/2014 - 10:18 | 4598308 teslaberry
teslaberry's picture

i wonder what citi looks like when she's mad. 

Thu, 03/27/2014 - 09:10 | 4598051 IronShield
IronShield's picture

Sorry, can't upvote that.  Too early in the morn; ugh.

Thu, 03/27/2014 - 08:15 | 4597873 Mi Naem
Mi Naem's picture

What is that thing, a Dolphins fan?!?

(...and presumably, also a corporate lawyer on the weekdays.)

Thu, 03/27/2014 - 00:54 | 4597378 pitz
pitz's picture

delete

Thu, 03/27/2014 - 08:12 | 4597861 GetZeeGold
GetZeeGold's picture

 

 

A dozen bankers suicided and Obama is coming....we're finally on our own.

http://www.youtube.com/watch?v=CfOx2AQOW1A

Thu, 03/27/2014 - 12:27 | 4598993 waterhorse
waterhorse's picture

Tin soldiers and drones are coming...

Thu, 03/27/2014 - 08:25 | 4597906 negative rates
negative rates's picture

And george, that was after Lehman went flat broke too, a move later regreted as the Lehman pain in the neck syndrome came back to haunt bankers in England, and then in New York too. Citi had nothing to stand on except the full faith and credit of the U.S. gvt which has since been proven mostly incompetant to manage large banks.

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