Is Citi The Next AIG?

Tyler Durden's picture

Earlier today, when we were conducting a routine check with the Office of the Currency Comptroller's on the total notional amount of derivatives held at the Big 4 banks in the context of the "JPMorgan break up" story, we found something stunning: using the latest, just released Q3 OCC data, JPMorgan is no longer America's undisputed derivatives king. Well, it still is at the HoldCo level, where it is number one in terms of notional derivatives with $65.5 trillion, but when one steps a level lower, namely the FDIC-insured commercial bank (the National Association or N.A.) level, something quite disturbing emerges. This:

As the chart above, which references Table 1 in the Q3 OCC report, shows Citigroup, or rather its FDIC-insured Citibank National Association entity, just surpassed JPM and is now the biggest single holder of total derivatives in the US. Furthermore, as the charts below show, while every other bank was derisking its balance sheet, Citi not only increased its total derivative holdings by $1 trillion in Q2, but by a whopping, and perhaps even record, $9 trillion in the just concluded third quarter to $70.2 trillion!


Here is Citi in context:


What is the reason for the surge in total derivative exposure? was it futures, options, forward or CDS? Neither. The answer: OTC traded swaps...


... which soared by $5 trillion in Q2 and over $8 trillion - or a massive 20% in just one quarter - in Q3 to a whopping $49 trillion, $16 trillion more than the OTC swaps held by JPMorgan or Goldman Sachs, and more than double the swaps held by Bank of America!


And that's not all: perhaps what is most bizarre is that Citigroup is the one bank whose HoldCo holds less derivatives, or $64.8 trillion, than its FDIC-insured N.A. OpCo which has $70.3 trillion in derivative notional exposure. For those wondering: this was not the case in the second quarter when the HoldCo ($61.8 trillion) held more derivatives than Citi's FDIC-insured bank ($61.1 trillion).

Then we started thinking:

Citigroup... swaps... Citigroup... swaps...

and a lightbulb click, because we remembered that it was none other than Citigroup that crafted the legislation on the swaps push-out provision which passed Congress without nary a peep from either side of the aisle, and which put taxpayers on the hook for FDIC-insured derivative exposure - and in Citi's own case a soaring $70 trillion as of September 30, 2014:


Screen Shot 2014-12-05 at 3.32.12 PM

We also revealed that, not surprisingly, the main backer of the bill is notorious Wall Street puppet Jim Himes (D-Conn.) the man BusinessWeek branded "Wall Street's Favorite Democrat" who also happens to be a former Goldman Sachs employee.


And yet, despite all these critical recollections, many questions remains, such as:

  • Why does Citi's FDIC-insured bank suddenly have more derivative notional exposure than its HoldCo: something which is generally without precedent?
  • Why, when every other Big 4 bank is derisking its balance sheet and reducing its derivative exposure in light of far more stringent capital requirements, is Citigroup adding to its derivative notional and swap exposure at an unprecedented, feverish pace, which saw the bank boost its OTC Swaps holdings by 20% in just one quarter?
  • When Congress was voting for the swaps push-out legislation, the Q3 OCC data was not yet publicly available. Was anyone in Congress aware that some $9 trillion had been added to the tally of taxpayer insured derivatives held at Citibank NA as of September 30.
  • What is Citigroups and Citibank's total derivative and total swap exposure as of December 31, and has it continue to soar at a rate of roughly $10 trillion per quarter?

And perhaps most impotantly: what is the underlying trade that requires Citigroup to keep adding to its swap exposure at a time when increasing volatility is forcing all other banks to unwind swaps in order to minimize VaR and be in compliance with Fed capitalization requirements?

And then another lightbulb went over our heads: the last entity to do this was, drumroll, JPMorgan, in early 2013, just before its London whale trade imploded and when the bank's attempt to corner the IG9 market failed miserably but not before JPM's CIO trading desk doubled down, then doubled down again and doubled down some more taking their total derivative exposure to several hundred billion... before it all came crashing down.

Now, we are not saying Citigroup is in the same boat as JPM's infamous CIO which led to congressional hearings and what not - especially since $250 billion was manageable; $50 trillion will not be - but we do wonder: just what is going on behind the massivaly margined scenes if Citi is following every page in the London Whale book and on top of everything it also had to lobby and petition Congress to change the law just so whatever it is that Citigroup is doing, it could continue to do, and what's more: with explicit taxpayer-funded backing.

Which leads us to the final question:

  • Is Citigroup about to become the "New Normal" AIG?

Source: OCC

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_ConanTheLibertarian_'s picture

I recommend they panic.

ArkansasAngie's picture

Break up the larges 25 banks with none of them being any bigger than the 26th largest bank.


Sherman Anti-trust!

MillionDollarBonus_'s picture

Reading the endless conspiracy theories and vulgar, knee-jerk rants on this blog, one comes away with the impression of a group of angry prepers and zit-faced teenagers projecting their dissatsfaction onto the world by blaming senior and respected politicians and business leaders for every ill in the world. No wonder this blog isn't taken seriously by resputable media outlets and investment professionals. This oweners of this website and thier readers need to do some serious work on their credibility, or they risk becoming completely marginalised.  

robertocarlos's picture

I'm over 50 years old, single, and I live in my Mom's basement.

SoberOne's picture

Good to see MDB has not lost his touch in the new year.

max2205's picture



Congress is a bunch of fools

RegularJoe's picture

Well, this is just great. Had a discussion with my colleagues today how crappy this whole economic "science" is. Some folks have spent dozens of years writing economics books, students spend years studying supply and demand etc. I mean, for god's sake, look at the oil price and try to define the moves with supply/demand or any other bull**it. The bottom line is that when some folks want Citi or oil price to go down then they will go down. We, including myself, are just useful idiots as one guy long time ago said. But at least it is nice to make a smart face and try to look like we know what is going on.

HowdyDoody's picture

In the time of the Roman Empire, the rich used chicken entrails to divine the future (beware the Ides f March), today they use 'charts' and 'algorithms'. The Romans got to eat the chickens so they have some advantage over the current lunacy.

bob_stl's picture

Looks like some bonuses are in order.

crusty curmudgeon's picture

It's almost as if Citi knew a law would come along and let them off the hook.

Jeff the Terrible's picture
Jeff the Terrible (not verified) crusty curmudgeon Jan 5, 2015 5:07 PM

MDB you are needed on the Congress thread.  

BTW, how was it when you first arrived in DC?  Everything you dreamed?

Jeff the Terrible's picture
Jeff the Terrible (not verified) crusty curmudgeon Jan 5, 2015 5:06 PM

MDB you are needed on the Congress thread.  

BTW, how was it when you first arrived in DC?  Everything you dreamed?

SoilMyselfRotten's picture

I'm surprised Cit hasn't taken on $750T in derivitives.

The9thDoctor's picture


Robert Kiyosaki is spot on in this interview.  This collapse that the doomers have been warning about ad nauseam is not a financial problem, but an educational problem.

The education system is stuck in the Agrarian Age and teaches Industrial Age concepts that are obsolete.  Our politicians are Industrial Age minded trying to solve Information Age problems.

The schools are lacking a FINANCIAL education, and that is why we have so many problems in society.

WillyGroper's picture

Might want to bone up on a bit of Charlotte Iseybut.

The educational system is as designed.

The9thDoctor's picture

You mean Charlotte Iserbyt.


Cliff Claven Cheers's picture

Just watched Robert Kiyosaki -- Good stuff, Yellen must have read his books.  She said same thing, poor hard working people just need to get some assests so they can have an income even when they lose their job. Geniuses.

rainingFrogs's picture

"We, including myself, are just useful idiots ..."

When you stop being useful, its time to panic.  Can't get by these days just being an idiot. 

illyia's picture

This is a Great Catch (and analysis). Christopher Story used to rail against CITI as the actual center of all that's wrong with the Bankster shift. Thus, any oddity of large sort, and this is large sort, must be suspected by me of being fundamental to the character of shady operations. Dig away Tylers! This is why I read ZH.

Damn blasted CITI got its pass the buck legislation through, too...

Shame on the American people...

RaceToTheBottom's picture

Well it is not the Morgue selling them to Citi.

The real point is who is selling them to Citi?  

GS is getting lighter and the Citi is getting heavier.


GS is setting Citi up like they setup Lehman...

Citi is "dead man walking" and GS will tell the US when to kill it and have the taxpayers get back on QEn.

disabledvet's picture

My money is still on DB as the "sucker" not Citi.

If I'm fearful of another currency collapse in say...Brazil...I would be putting my money in Citigroup.

GS shines JPM's shoes...and that's where the debt problems all lay. Chicago, Texas, "commodity speculations"...that's GS buying from JPM in my view.

Plus JPM, BofA and MS have huge brokerage businesses now.

GS is a minnow in that ocean.

Might get some good opportunities to buy GE really cheap here...

cnmcdee's picture

The Cocksuckers are deliberately going to default and they know it!  But $70 Trillion can't be backed up by anyone so something very smelly is being planned inside the US Government.  Nobody can survive this bankruptcy and it's going to blow up the derivative market and everything linked to it.

*** They are planning to sink Citi in this in a global default, but GS and some of the others are planned to survive! ***

The Federal reserve GAO report showed that Citi in 2008 recieved like a $1.7 Trillion bailout. However official numbers were only 1/100 of that amount.


ThroxxOfVron's picture

"Well it is not the Morgue selling them to Citi.

The real point is who is selling them to Citi?   "

The FED.

The FED has been selling Interest Rate Swaps for years.

Mandel Bot's picture

There comes a point, and I think we have reached it, when the money being sloshed around in the derivatives 'market' becomes so large that it is meaningless.

Fer crissake what does 70 trillion mean? $10 for every man woman and child on earth held by one company!!!.

The whole thing is ridiculous and cannot continue. But when it all comes crashing down, guess who will be maimed by the flying debris.

hendrik1730's picture

Wrong, 70 trillion US$ ( 7.10^13, 70.000 billion, or ) divided by 7 billion people makes 10.000 US$ per head of the world population. Fasten your seatbelt when all THAT comes crashing down. And these are the derivatives exposures of 1 bank ONLY, there are others around ....

Arnold's picture

Sooo sorry kids, not my exposure......... oh wait.........

topshelfstuff's picture

Remember how they changed the Bankruptcy Law just before the Mortgage Meltdown brought about Bankruptcies. As for Increases in Derivatives, sure, now that its clear losses go on the Taxpayers Tab, after the winners get 100 cents on the dollar

Mandel Bot's picture


Omigod, you are right. I got my billions and trillions all mixed up.

Now its beyond ridiculous, its terrifying.


Snoopy the Economist's picture


There are only 7 Billion people by which to divide - so it's $10k per person.

Wait What's picture

for someone who uses fractals as a profile pic and refs Mandebrot as a handle, it's kinda funny to see him stumble over a 2rd grade division problem. i couldn't help but laugh.

Overfed's picture

Aww, give him break. I mean really, what are a few decimal places between friends?

Mandel Bot's picture

You guys are merciless, but I deserve it.

If you can get beyond focussing on my math blunder, the fact remains that the amount of money controlled by just one or two TBTF banks is insane. When this house of cards comes down, there is no way in hell the system can be saved.

There just isn't enough money in the whole world to bail out even one of these banks.

Wars have begun over much less.

Arnold's picture

Yes , but well within the price range of the average middle class american, at least untill they are indoctrinated .

PoliticalRefugeefromCalif.'s picture

"Good to see MDB has not lost his touch in the new year".

Back tanned, rested and ready!..

-now that was refreshing.

eatthebanksters's picture

Funny that MDB only raises his head to stomp any stories that might contain a glimmer of truth in conjecture. I am guessing MDB is an elitist beneficiary of Obummer's .001% status quo and has disdain for the burdened masses who speak out against the unfair crony system.

Liberal's picture

As a staunch liberal, I was appalled until I read that Jim Himes backed the bill to bail out these banks derivatives exposure. Since then, I am all for it because we just need more democrats, preferably those with dual citizenship.

MillionDollarBonus_'s picture

You make a good point my friend. Unlike many of my brothers on the left, I have always taken a strong stance in favor of government measures to support our financial system. We on the left want to help the needy, provide for the choice-less, helpelss poor, and make a real difference in the world. If we want to continue to make progress at the same rate as we have over the last 50 years, we need to ensure that the institutions underlying our economy are strengthened and reinforced in every way possible. A strong economy rests on a strong financial system, a healthy agricultural sector, a booming housing market, and well-financied government departments with happy, satisfied public servants. Each and every one of these pillars must be nurtured and supported, so that we have a strong economic, moral and social framework on which to build our future.  

pods's picture

MDB you are needed on the Congress thread.  

BTW, how was it when you first arrived in DC?  Everything you dreamed?


Bay of Pigs's picture

MDB is the ultimate "poo flinging monkey".

rccalhoun's picture

but most important is that he gets his million dollar bonus.

otherwise, cancel all that benevolence and rape the poor.

shanearthur's picture

MillonDollarBoneUs There, fixed that handle for you.

NotApplicable's picture

The two of you tag-teaming this thread has left me in tears.

The Wizard's picture
Plausible Deniability A condition in which a subject can safely and believeably deny knowledge of any particular truth that may exist because the subject is deliberately made unaware of said truth so as to benefit or shield the subject from any responsibility associated through the knowledge of such truth.
benb's picture

“The powers of financial capitalism had (a) far-reaching aim, nothing less than to create a world system of financial control in private hands able to dominate the political system of each country and the economy of the world as a whole. This system was to be controlled in a feudalist fashion by the central banks of the world acting in concert, by secret agreements arrived at in frequent meetings and conferences. The apex of the systems was to be the Bank for International Settlements in Basel, Switzerland, a private bank owned and controlled by the world’s central banks which were themselves private corporations. Each central bank…sought to dominate its government by its ability to control Treasury loans, to manipulate foreign exchanges, to influence the level of economic activity in the country, and to influence cooperative politicians by subsequent economic rewards in the business world.”
Carroll Quigley, member of Council on Foreign Relations (CFR), mentor to Bill Clinton, quote from “Tragedy and Hope”, 1966


NotApplicable's picture

I think I need to pull that book back out and reread it, as it's obviously very topical right now.