Tuesday Humor: "Citi Today Is A Different Bank Than It Was Before The Crisis"

Tyler Durden's picture

The FDIC decided to wait with its dose of pre-holiday humor until after the Barclays fixing for today's market close turned out to be spot on. And by that we mean that official release of the US banks' "living will" statements, which as far as we know is about the most worthless exercise ever conducted, and about the dumbest thing to be conceived by that very undynamic duo of Barney Frank and Chris Dodd. Because last we checked, the treatment of living wills in bankruptcy court, where all these firms will end up eventually anyway, is... non-existent. But the real fun is when one actually reads this indicative statement from Citigroup: "Citi is today a fundamentally different institution than it was before the crisis." And that's where we stopped. Because it is banks wasting their time (and taxpayer bailout money) on gibberish like this instead of analyzing the risk inherent in their prop positions that guarantees the next CIO-like blow up will not be just $5 billion but far, far more, and will certainly prove that living wills when one has to equitize tens of billions in unsecured debt are worth exactly didely squat.

One item of note may be what JPM says about its derivative based commodity exposure for obvious reasons. Here it is:

Commodities contracts are used to manage the price risk of certain commodities inventories. Gains or losses on these derivative instruments are expected to substantially offset the depreciation or appreciation of the related inventory. Also in the commodities portfolio, electricity and natural gas futures and forwards contracts are used to manage price risk associated with energy-related tolling and
load-serving contracts and investments.

And here is how Jamie Dimon mitigates counterparty risk:

The Firm uses credit derivatives to manage the counterparty credit risk associated with loans and lending-related commitments. Credit derivatives compensate the purchaser when the entity referenced in the contract experiences a credit event, such as bankruptcy or a failure to pay an obligation when due. Credit derivatives primarily consist of credit default swaps (“CDS”).

The same CDS that the banks being hedged against use as a source of Net Income via DVA adjustments at the end of every quarter.

For those who have more patience than us, here it is from the FDIC:

As required by the FDIC's regulation regarding resolution plans for systemically important financial institutions, (12 CFR section 381.8(c)), and, as applicable, the FDIC's regulation regarding resolutions plans for insured depository institutions (12 CFR section 360.10(f)), each resolution plan must be divided into a public section and a confidential section. The public sections available on the FDIC's website have not been edited or reviewed by the FDIC and are provided here exactly as submitted by the covered companies.

All files are in PDF format. For information on, or help with downloading the PDF reader visit PDF Help.

Plan Submissions with Public Sections

Legal Entity Legal Name of Parent Company Type of Plan Due By
Bank of America Corporation   165(d) July 2, 2012
Bank of America NA Bank of America Corporation CIDI July 2, 2012
FIA Card Services NA Bank of America Corporation CIDI July 2, 2012
Barclays Plc   165(d) July 2, 2012
Citigroup Inc.   165(d) July 2, 2012
Citibank NA. Citigroup Inc. CIDI July 2, 2012
Credit Suisse Group AG   165(d) July 2, 2012
Deutsche Bank AG   165(d) July 2, 2012
The Goldman Sachs Group, Inc.   165(d) July 2, 2012
Goldman Sachs Bank USA The Goldman Sachs Group, Inc. CIDI July 2, 2012
JPMorgan Chase and Co.   165(d) July 2, 2012
JPMorgan Chase Bank NA JPMorgan Chase and Co. CIDI July 2, 2012
Chase Bank USA NA JPMorgan Chase and Co. CIDI July 2, 2012
Morgan Stanley   165(d) July 2, 2012
Morgan Stanley Bank NA Morgan Stanley CIDI July 2, 2012
UBS Finanzholding AG   165(d) July 2, 2012

 

And select headlines on each from Bloomberg:

  • *CITI SAYS IT IS DIFFERENT THAN IT WAS BEFORE THE CRISIS   :C US
  • *CITI SAYS IT HAS MEANINGFULLY SHRUNK SINCE THE CRISIS     :C US
  • *CITI SAYS IF NEED RESOLUTION PLAN SR MGMT WOULD BE REPLACED

 

  • *BOFA PLAN CONTEMPLATES STRATEGY WHERE BOFA IN FDIC RECEIVERSHIP
  • *BOFA SAYS PHASE 1 OF PLAN TO CUT COSTS BY $5B/YR BY 2014
  • *BOFA SAYS PRIMARY RISK EXPOSURES IN TRADING PORTFOLIO, MSRS, EQUITY INVESTMENTS (interconnected like Japan?)
  • *BOFA SAYS IT DOENS'T USE MACRO-CREDIT HEDGING IN SOME GROUPS (do does use JPM-like tail-risk hedging in some then?)
  • *BOFA SEES ABLE TO QUICKLY GET CASH FROM US SECURITIES UNDER PLAN (selling into that avalanche should be fun?)

 

  • *BARCLAYS FOUND 6 US MATERIAL ENTITIES AS CORE FOR PLAN :BARC LN
  • *BARCLAYS SAYS FUNDING STRATEGY IS TO DEVELOP DIVERSIFIED BASE
  • *BARCLAYS SAYS BOARD IS RESPONSIBLE FOR OVERSEEING THE PLAN (which members?)
  • *BARCLAYS SAYS RISK FUNCTION TO MANAGE RESOLUTION ANALYSIS (like JPM?)

 

  •  *MORGAN STANLEY SAYS GLOBAL TREASURER RESPONSIBLE FOR 165D PLAN
  • *MORGAN STANLEY CITES ORDERLY LIQUIDATION AUTHORITY       :MS US
  • *MORGAN PLAN PREFERRED APPROACH IS SALE OF STANDALONE UNITS
  • *MORGAN PLAN POTENTIAL BUYERS COULD BE FINL, PRIVATE EQUITY
  • *MORGAN STANLEY PLAN HAS NO COST TO FDIC DEPOSIT INSURANCE FUND (magic)
  • *MORGAN STANLEY PLAN HAS NO SERIOUS ADVERSE EFFECTS ON STABILITY
  • *MORGAN PLAN SEES INSURED DEPOSITORS TIMELY ACCESS TO FUNDS

 

  • *DEUSTCHE SAYS PLAN WOULD ALLOW 'GOOD' AND 'BAD' SEPARATION
  • *DEUTSCHE: U.S. RESOLUTION PLAN ASSUMES U.S./GERMANY COOPERATION (yes aha)

 

  • *JPMORGAN SAYS HOLDS SIG. AMOUNT OF CAPITAL IN COMMON EQUITY
  • *JPMORGAN HAS COMP. RECOVERY PLAN ON ACTIONS TO AVOID FAILURE (Tail risk hedging?)
  • *JPMORGAN: FIRM COULD BE RESOLVED UNDER TITLE II OF DODD-FRANK
  • *JPMORGAN: TITLE II STRATEGY WOULD PROVIDE SINGLE POINT OF ENTRY
  • *JPMORGAN SAYS FDIC WOULD USE POWER TO CREATE BRIDGE ENTITY
  • *JPMORGAN SAYS ANY LOSSES ON RECAP WOULD BE BORNE BY EQUITY HLDR

 

  • *UBS AG SAYS 3 BUSINESS DIVISIONS IN U.S. OPERATE 7 CORE LINES

 

  • *DB GROUP SAYS IT'S WELL-PLACED TO FACE FUTURE WITH CONFIDENCE

 

  • *GOLDMAN SAYS NO DEPOSIT INSURANCE FUND EFFECT FROM PLAN  :GS US
  • *GOLDMAN SACHS FILES BANK RESOLUTION PLAN WITH REGULATORS :GS US
  • *GOLDMAN PLAN WOULD PROVIDE DEPOSITOR ACCESS WITHIN 1, 2 DAYS
  • *GOLDMAN: ALTERNATIVE RESOLUTION PLANS INCLUDE SALE,  BRIDGE BANK, ASSET LIQUIDATION

 

  • *CREDIT SUISSE STRATEGY MAY BE CHALLENGING IN EXTENDED DISTRESS
  • *CREDIT SUISSE SAYS SWISS REGULATOR HAS POWER TO FORCE SALE

 

from JPM on commodity hedging:

Commodities contracts are used to manage the price risk of certain commodities inventories.

 

Gains or losses on these derivative instruments are expected to substantially offset the depreciation or appreciation of the related inventory. Also in the commodities portfolio, electricity and natural gas futures and forwards contracts are used to manage price risk associated with energy-related tolling and load-serving contracts and investments.
people love this stuff cause of the mega short and what not

source: http://www.fdic.gov/regulations/reform/resplans/jpmc165.pdf

And here is the Citi statement in particular: