Sunday, November 23, 2008

Citigroup Rescue....#*@&%bank

To boost investor confidence in Citigroup the government unveiled a bold plan Sunday, including taking a $20 billion stake in the firm as well as guaranteeing hundreds of billions($306,000,000,000) of dollars in risky assets. The move, announced jointly by the Treasury Department, the Federal Reserve and the Federal Deposit Insurance Corp., is aimed at shoring up a huge financial institution whose collapse would wreak havoc on the already crippled financial system and the U.S. economy.

Does this shore up confidence? It sure makes in obvious that those in charge of putting band-aides on bullet-holes can't see past their own nose. What has happened between tonight and a few weeks back when the government invested the previous $25 billion in Citigroup? How many more weeks will it be before the government offers Citigroup another $25 billion or so. They all better go on an expensive retreat and think about it.

Maybe they(WE) have to do this, maybe we don't, but why didn't these geniuses see this coming a few weeks back. They actually thought that $25billion was enough a few weeks back. After injecting nearly $300 billion of capital into financial institutions, federal officials now appear to be willing to absorb bad assets, on a targeted basis, from specific institutions. This will not be the last attempt to save sinking ships. In addition to $2 trillion in assets it has on its balance sheet, Citi has another $1.23 trillion in entities that aren't reflected there, according to reports. Some of those assets are tied to mortgages, and investors have worried they could cause heavy losses if they are brought back on the company's books. It doesn't only have fleas, it has ticks and the mange.

Citigroup(shitibank)---click to enlarge

If we as tax payers are going to fund a distressed equities hedge fund, how can we now not bail out the auto industry? This mess with Citi is going to cost a lot more than the money Detroit is asking for. If we are going to invest in failing banks and other troubled and burdened industries, where does it stop? Where do we draw the line? We sure better be investing in companies that offer some growth to offset the boat-anchors we own preferred stock in currently. We will not get preferred stock in solar and new fuel cell companies that the government is going to surely offer tax incentives to jump start that industry. We will not get preferred stock in the infrastructure companies that will most likely get business as the federal government attempts to restart the economy with spending. These last two will at least create jobs and give some people some benefit. Tying up $351 billion in Shitibank isn't the best investment. With the additional 1.2 trillion in assets currently off its books, we will be throwing more money into this fire in 6 weeks time.

Link to terms of the "deal".

Fed Pledges $7.4 Trillion To Ease Frozen Credit.
That is equal to $24,000 for every U.S. citizen and 9 times the Iraq war. Scary.

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