U.S. Agrees to Rescue Struggling Citigroup

[HOOKS]

Plan Injects $20 Billion in Fresh Capital, Guarantees $306 Billion in Toxic Assets

http://online.wsj.com/article/SB122747680752551447.html


The federal government agreed Sunday night to rescue Citigroup Inc. by helping to absorb potentially hundreds of billions of dollars in losses on toxic assets on its balance sheet and injecting fresh capital into the troubled financial giant.

The agreement marks a new phase in government efforts to stabilize U.S. banks and securities firms. After injecting nearly $300 billion of capital into financial institutions, federal officials now appear to be willing to help shoulder bad assets, on a targeted basis, from specific institutions.

Citigroup is one of the world's best-known banking brands, with more than 200 million customer accounts in 106 countries. Its plunging stock price threatened to spook customers and imperil the bank.

If the government's rescue plan is a success, it could help bring stability to the entire financial system. If it doesn't, even deeper doubts about the industry's future could spread.

After a weekend of marathon talks between Citigroup executives and top federal officials, the parties late Sunday night nailed down a package in which the government will help protect the company from its riskiest assets.

Under the plan, Citigroup and the government have identified a pool of about $306 billion in troubled assets. Citigroup will absorb the first $29 billion in losses in that portfolio. After that, three government agencies -- the Treasury Department, the Federal Reserve and the Federal Deposit Insurance Corp. -- will take on any additional losses, though Citigroup could have to share a small portion of additional losses.

The plan would essentially put the government in the position of insuring a slice of Citigroup's balance sheet. That means taxpayers will be on the hook if Citigroup's massive portfolios of mortgage, credit cards, commercial real-estate and big corporate loans continue to sour.

In exchange for that protection, Citigroup will give the government warrants to buy shares in the company.

In addition, the Treasury Department also will inject $20 billion of fresh capital into Citigroup. That comes on top of the $25 billion infusion that Citigroup recently received as part of the the broader U.S. banking-industry bailout.

The government and Citigroup had hoped to unveil the plan early Sunday evening, but negotiations dragged on longer than expected. Treasury Secretary Henry Paulson began briefing Congressional leaders about the plan later in the evening.

Asian markets were mostly lower in early Monday trading as news of the discussions surfaced. Japan's markets were closed for a holiday.

The sweeping rescue plan underscores how concerned the government had become about letting Citigroup's fortunes continue to deteriorate. The company has been pounded by mortgage-related losses and is on track to suffer further from the weakening economies in the U.S. and around the world.

Last week, with Wall Street rapidly losing confidence in the company, its shares tumbled 60% to a 16-year low. Still, Citigroup Chief Executive Vikram Pandit and other top executives insisted last week that the company remained on solid financial footing.

More in link.

[En Sabah Poo]

I think I owe Citigroup a couple grand for my furniture.

[RebootedCorpse]

Because Citigroup is so much more important than the auto industry

[costello]

wtf? I almost want to say screw it and take out loans or charge a new house, car and every thing I ever wanted with no intention of paying it all back. Why should I care?

[Gregory]

You'd think the giant balance I just paid off would have kept them in the black.

[Ryudo]

Idea: the CEOs, boards, executives, and so forth cut their salary back to $1 a week.

They then use the millions of dollars they have from this to either pay the government back or keep the company afloat.




Sometimes this kills me. "Oh, my company's going down the toilet!" says the rich old dude from his mansion.

[costello]

You'd think the giant balance I just paid off would have kept them in the black.

You pay your bills? Sucker.

[costello]

Idea: the CEOs, boards, executives, and so forth cut their salary back to $1 a week.

Sometimes this kills me. "Oh, my company's going down the toilet!" says the rich old dude from his mansion.

And he flew over in his private jet just to tell us this.

[HoneyDippinDan]

Oh yeah! My day at work is guaranteed to be nothing but talking to happy customers and members of the public today.

:scared:

You guys will save me when the mob of angry people with pitchforks show up at my building, right?

[Beep Beep!]

From the LA Times:

"The firm will give the government sweeping powers over its operations, allowing it to effectively prohibit stock dividends for the next three years and pass judgment on all executive pay packages."

So no dividends

And someone from the Federal Government has to approve all executive pay.

I want that job.

[NATE!]

Oh yeah! My day at work is guaranteed to be nothing but talking to happy customers and members of the public today.

:scared:

You guys will save me when the mob of angry people with pitchforks show up at my building, right?

If by "save you," you mean, "bring a camcorder and laugh as we watch them eviscerate you Cannibal Holocaust style," then yeah, you can count on my support. :)

[Taxman]

I like that the taxpayer get an equity position in that firm rather than giving a pure handout. I do not like that it will do nothing about continuing to raise excessive fees, usery interest rates, and likely will not curb tens of thousands of lay offs.

[WillieLee]

For as long as I can remember, many think-tanks and newspaper editors said Canada should be more like the US in regards to the way we regulate our financial institutions. Haven't seen that opinion being voiced in the last couple months...

[Brian Defferding]

Because Citigroup is so much more important than the auto industry

Think of all the jobs lost if Citigroup went under!

[HoneyDippinDan]

If by "save you," you mean, "bring a camcorder and laugh as we watch them eviscerate you Cannibal Holocaust style," then yeah, you can count on my support. :)

:Queue's up Dethklok music:

[jason hissong]

So does this mean I have to make my student loan payment to the U.S. Government?

[HoneyDippinDan]

Think of all the jobs lost if Citigroup went under!

(((hugs)))

[Kedd]

Time for me to fly to washington and make my case for them to bail my business out

[RickLM]

For as long as I can remember, many think-tanks and newspaper editors said Canada should be more like the US in regards to the way we regulate our financial institutions. Haven't seen that opinion being voiced in the last couple months...


If we've shut up a dozen conservative talking heads, the recession will have been worth it.

[bachman]

Because Citigroup is so much more important than the auto industry

You're not really a "glass half-full" type of guy, are ya?

[NATE!]

Gotta agree with Corpsey on this one. Citigroup can die screaming choking on its own shit, and some other bank will pop up and easily fill the void, but if the autos go down, we're fucked.

[Brian Defferding]

Gotta agree with Corpsey on this one. Citigroup can die screaming choking on its own shit, and some other bank will pop up and easily fill the void, but if the autos go down, we're fucked.

I think GM should die out too if they can't keep themselves afloat. If we really support them, we'll buy their cars. Otherwise, I think it's a necessary hit for the US economy if they can't get out of the red.

[jason hissong]

Let's just do away with currency, in general.

[RebootedCorpse]

I think GM should die out too if they can't keep themselves afloat. If we really support them, we'll buy their cars. Otherwise, I think it's a necessary hit for the US economy if they can't get out of the red.

1 in 10 jobs is part of the auto industry. Imagine unemployment going from a terrible 7 or 8 % to a nightmarish 17%.

[Busman]

1 in 10 jobs is part of the auto industry. Imagine unemployment going from a terrible 7 or 8 % to a nightmarish 17%.

Because if GM goes away all of the cars they ever sold and all of the jobs they have now will not reappear at any other car company?

[RebootedCorpse]

Because if GM goes away all of the cars they ever sold and all of the jobs they have now will not reappear at any other car company?

Last I checked, Toyota and Honda aren't hiring either.

[Busman]

Last I checked, Toyota and Honda aren't hiring either.

And they wouldn't be if GM closed it's doors?

[Brian Defferding]

Last I checked, Toyota and Honda aren't hiring either.

Like I said, it's an unfortunate but necessary hit. A loan or bailout will simply delay the inevitable and, even worse, have their eventual bankruptcy be even more drastic to the economy; thanks to the US floating a loan (with money it doesn't even have to begin with).

[Busman]

Like I said, it's an unfortunate but necessary hit. A loan or bailout will simply delay the inevitable and, even worse, have their eventual bankruptcy be even more drastic to the economy; thanks to the US floating a loan (with money it doesn't even have to begin with).

Also, those jobs would not go away permanently, yeah maybe a lot would. But there would be a massive gap in auto sales.

Hell, it could be the impetus for a car making revolution in the US, honestly. You might see places like Tesla Motors and other indy's suddenly have room to breathe.

How many times in my lifetime are we going to bail these fucks out? It's sickening.

[Brian Defferding]

Also, those jobs would not go away permanently, yeah maybe a lot would. But there would be a massive gap in auto sales.

Hell, it could be the impetus for a car making revolution in the US, honestly. You might see places like Tesla Motors and other indy's suddenly have room to breathe.

How many times in my lifetime are we going to bail these fucks out? It's sickening.

Exactly. Sure, the rippling effects on the economy would be awful, but we can't simply keep them working just to have a job. Businesses and industries advance when they make a product people want. GM hasn't been doing that. Bailing failed automakers out can become like a regression in industrialized innovation.

[RebootedCorpse]

Also, those jobs would not go away permanently, yeah maybe a lot would. But there would be a massive gap in auto sales.

Hell, it could be the impetus for a car making revolution in the US, honestly. You might see places like Tesla Motors and other indy's suddenly have room to breathe.

How many times in my lifetime are we going to bail these fucks out? It's sickening.

It would turn the recession into a depression. It would effectively end the manufacturing sector in this country.
ALL other nations take measures to protect their workers. The U.S. must do the same or face economic ruin.

[Ashwin Pande]

Let's just do away with currency, in general.

I suggest we use lego blocks instead.

[RebootedCorpse]

You also have to keep in mind the number of retirees that relied on the auto manufacturers to live up to the guarantee it gave them in exchange for the best, most productive years of their lives.
The impact on health care would also be staggering.

[Busman]

It would turn the recession into a depression. It would effectively end the manufacturing sector in this country.
ALL other nations take measures to protect their workers. The U.S. must do the same or face economic ruin.

I dunno. A structured dismantling could work. Take the money we're going to use to bail them out and fund other operations that are working.

I don't understand the need to fund a company that is clearly not competitive in the marketplace.

Heck, take the money and just give it to the employees that would lose their jobs, I'd be more fine with that.

[RebootedCorpse]

I dunno. A structured dismantling could work. Take the money we're going to use to bail them out and fund other operations that are working.

I don't understand the need to fund a company that is clearly not competitive in the marketplace.

Heck, take the money and just give it to the employees that would lose their jobs, I'd be more fine with that.

The playing field has never been level. These other countries are all operating under rational, nationalized health so that cost has not been a factor for those automaker. Also the manufacturing sectors benefit from Gov't sponsored R&D and tariff's that protect their products against competition.

[Busman]

The playing field has never been level. These other countries are all operating under rational, nationalized health so that cost has not been a factor for those automaker. Also the manufacturing sectors benefit from Gov't sponsored R&D and tariff's that protect their products against competition.

GM makes more of their money outside of the US than it does in the US. 60/40 or something like that. Ford has a booming business in the UK and other places. I think you are trying to attach more to this than there is. The baseline is that GM is and has been making cars that people don't want to buy, especially in the US and it's cost them time and again. If this were the first bailout I might be more sympathetic, but this is what? 3 or 4 in my lifetime? How many passes do they get?

[RebootedCorpse]

GM makes more of their money outside of the US than it does in the US. 60/40 or something like that. Ford has a booming business in the UK and other places. I think you are trying to attach more to this than there is. The baseline is that GM is and has been making cars that people don't want to buy, especially in the US and it's cost them time and again. If this were the first bailout I might be more sympathetic, but this is what? 3 or 4 in my lifetime? How many passes do they get?

The cars sold overseas are made overseas.
The fact is that people were buying the SUVs that American automakers were offering. The gas spike and the credit crunch has hit auto Manufacturers hard.
The fact that GM makes more money overseas than it does in the U.S. tells you that much of the problem is with the structure of doing business in the States.
I don't know what you're talking about with 3 or 4 bailouts. Chrysler was given a loan twenty-some years ago which it paid back. When was the last time that you believe automakers were bailed out?

[Busman]

I don't know what you're talking about with 3 or 4 bailouts. Chrysler was given a loan twenty-some years ago which it paid back. When was the last time that you believe automakers were bailed out?

Yep, I'm smoking crack. I've just been wrongly internalizing the troubles that Ford has been having over the last 5 or so years as well. I certain remember the Chrysler deal and how Iacocca brought them through that. But, I had a vague (false) memory that GM was experiencing similar troubles back in that day.

[Brian Defferding]

Chrysler is, not-so-coincidentally, looking to be bought out by GM now.

[RebootedCorpse]

Chrysler is, not-so-coincidentally, looking to be bought out by GM now.

Hard to believe it only took about two weeks for that idea to go tits up and for them to be at the edge of bankruptcy.

[Taxman]

Because if GM goes away all of the cars they ever sold and all of the jobs they have now will not reappear at any other car company?

http://www.606studios.com/bendisboard/showthread.php?p=5443368&#post5443368

[Taxman]

Chrysler is, not-so-coincidentally, looking to be bought out by GM now.As long as Nardelli can keep his private jet going, who the hell cares what else happens?

[lonesomefool]

Like I said, it's an unfortunate but necessary hit. A loan or bailout will simply delay the inevitable and, even worse, have their eventual bankruptcy be even more drastic to the economy; thanks to the US floating a loan (with money it doesn't even have to begin with).

I think you would be singing a different tune if your job was tied up in the auto industry.

It's easy to sit back and call for things to go under or for people to get fired when it doesnt directly hurt you one way or another. A perfect example is how people are so quick to call for the head of a manager/head coach of a sports team.

The problem is that if the Auto's go down, no only are you losing those jobs, but you will see a lot of towns become ghost towns in a sense because all the other business' will also go away.

[Magnum V.I.]

I think you would be singing a different tune if your job was tied up in the auto industry.

It's easy to sit back and call for things to go under or for people to get fired when it doesnt directly hurt you one way or another. A perfect example is how people are so quick to call for the head of a manager/head coach of a sports team.

The problem is that if the Auto's go down, no only are you losing those jobs, but you will see a lot of towns become ghost towns in a sense because all the other business' will also go away.

At least Michael Moore will have work during this Democrat Presidency!

[RebootedCorpse]

At least Michael Moore will have work during this Democratic Presidency!

fixed

[Taxman]

I think you would be singing a different tune if your job was tied up in the auto industry.

It's easy to sit back and call for things to go under or for people to get fired when it doesnt directly hurt you one way or another. A perfect example is how people are so quick to call for the head of a manager/head coach of a sports team.

The problem is that if the Auto's go down, no only are you losing those jobs, but you will see a lot of towns become ghost towns in a sense because all the other business' will also go away.Amazing that barely a thought goes into giving trillions to the financial industry, and what is a mere fraction of that to the auto industry is cause for such grave caution.

[Taxman]

At least Michael Moore will have work during this Democratic Presidency!Moore was on about the problems with the auto industry close to 20 years ago.

[Busman]

Moore was on about the problems with the auto industry close to 20 years ago.

If he didn't come across as such a manipulating hack with an axe to grind, maybe more people would listen.

[RebootedCorpse]

If he didn't come across as such a manipulating hack with an axe to grind, maybe more people would listen.

:roll:

[Busman]

:roll:

Look, I'm an asshole, I can come off as a pompous asshole, I recognize it. I don't expect people to take me seriously when I do. Moore uses a lot of the same tactics that he points fingers at others doing and then expects everyone to treat it more seriously than an Oliver Stone film? meh.

[Brian Defferding]

:roll:

You don't think he comes off as one? Right. In that case, John Stossel doesn't either.

[Brian Defferding]

I think you would be singing a different tune if your job was tied up in the auto industry.

It's easy to sit back and call for things to go under or for people to get fired when it doesnt directly hurt you one way or another. A perfect example is how people are so quick to call for the head of a manager/head coach of a sports team.

The problem is that if the Auto's go down, no only are you losing those jobs, but you will see a lot of towns become ghost towns in a sense because all the other business' will also go away.

There is no job out there that's guaranteed. There is no savings guaranteed. Life happens. We have to take the hits and roll with them as they come. If I lose my job tomorrow because my company is burning millions to billions of dollars a month and I thought I wouldn't get effected by it, then I'm either living under a rock, have a pompous illusion of being bulletproof, or feel entitled to keep a job even if it's for a failing company and at the cost of the taxpayers. Or I'm just plain stupid.

[HoneyDippinDan]

For any one that cares:

Today went shockingly well. I didn't have any customers ask me about the bailout but I was told from people on the morning shift that we were swamped early in the morning with customers asking how the bailout is going to affect them. We weren't really told anything about the situation, we were just giving a list of talking points for customers if they asked. I'm glad I didn't have to talk to the customers about the bailout, especially since we were all sent emails last Friday stating that everything was okay when the rumors of us being sold came about.

My manager emailed up about the a big management meeting held this morning and basically said that upper management thinks everything is going to be okay but things are going to suck for a long time. The shittiest part is my manager thinks we can forget about bonuses and raises this year. It's nothing official, mainly my managers opinion of what he got out of the meeting, but if it turns out to be true, that's bullshit. I did all kinds of extra stuff this year in the hopes that I'd be seeing my efforts rewarded when it's time for my annual review which is coming up in a couple months and now it looks like I'll be getting jack because other people in my company, people I'll probably never know or meet, fucked up shit on such a grand scale that it's fucked my shit up as well as fucked up shit for all my fellow taxpayers.

:-x

[Beep Beep!]

The shittiest part is my manager thinks we can forget about bonuses and raises this year. It's nothing official, mainly my managers opinion of what he got out of the meeting, but if it turns out to be true, that's bullshit. I did all kinds of extra stuff this year in the hopes that I'd be seeing my efforts rewarded when it's time for my annual review which is coming up in a couple months and now it looks like I'll be getting jack because other people in my company, people I'll probably never know or meet, fucked up shit on such a grand scale that it's fucked my shit up as well as fucked up shit for all my fellow taxpayers.

:-xYep.

Before I was laid off, everyone at my former employer was told no bonuses and only COLA raises. It will sound really shitty, but really, be glad you have a job. I wouldn't wish looking for one on my worst enemy. Your efforts may be rewarded with keeping your job.

[HoneyDippinDan]

Yep.

Before I was laid off, everyone at my former employer was told no bonuses and only COLA raises. It will sound really shitty, but really, be glad you have a job. I wouldn't wish looking for one on my worst enemy. Your efforts may be rewarded with keeping your job.

Yeah, I guess it could be worse. My brother works at Hewlett Packard and he's currently on a mandatory, unpaid, two week vacation and he's going to be required to take another one starting Christmas week.

[dEnny!]

Any chance for my next credit card payment I can just write the words "BAILOUT" on them?

Or "I've already paid this bill with my tax dollars you bums!"

[Taxman]

Any chance for my next credit card payment I can just write the words "BAILOUT" on them?

Or "I've already paid this bill with my tax dollars you bums!"Let us not lose sight of the irony in this post. Over the past few decades the Fed has changed the laws to allow this company to charge interest rates which were once illegal, increase fee which in some cases are probably 1000% more than they one were and recover much more from the bankrupted customer. All of these favors to increase their profit margins at the expense of their customers, and still the come to the taxpayer for money because even with all that help from the government, they were still not able to run their business without help. The customer is out, the taxpayer is out, many of their employees are or will be out, and who is ahead? Their top executives over the course of the past 30 years who have safely tucked away many millions of dollars for their own benefit, and their benefit only.

Did someone have a question about income redistribution?