Will Citigroup Swim With the Fishes?
Nov 23, 2008
Posted by Jody Eisenman | Filed under Uncategorized
There is a story in The Godfather (by Mario Puzo) where they deliver a fish wrapped in a mans’ vest, The implication is that he now “sleeps with the fishes” i.e. at the bottom of the sea. Is this the end of Citi? I am firmly convinced that Citi cannot possibly survive in its’ current form. (see my article on October 5 ): Understanding The Downfall of Bear Stearns
Citigroups’ balance sheet woes have sent their stock down below $4 per share. The stock was over 50 a year ago. The bank is heavily leveraged. I heard from reliable information that many institutions were looking to transfer their funds out of the bank on Friday. Such a run, which led to Wachovia’s desperate sale to Wells Fargo, could put Citi in deep jeopardy. The problem is that unlike Wachovia, Citi is considered too big to fail. However, they may also be too big to be taken over, especially given the severe decline in financial stocks. According to Charlie Gasparino from CNBC, the government is desperately trying to find a solution. He believes they Citi will not get an AIG-type bailout.
I do not believe that Citi will be allowed to fail. A chapter 11 by Citi could lead to a domino effect which might threaten the destruction of our entire financial system. I think that the Fed will find a buyer, possibly a foreign entity, who will take them over with government guarantees. I believe that Citi will not survive this weak in its’ current form. Either they will merge with another financial institution, or the government will arrange a major bailout package. We shall see.
The market rallied almost 500 points on Friday. Many commentators were crediting this to the naming of Timothy Geithner as head of the Federal Reserve. I doubt this was the real reason. I think the market rose due to a combination of the oversold condition and that it was option expiration day for November. Anyone know the last time the market rose 2 days in a row? Well, you have to go back around 2 months to September 24-26. During those 2 days, the Dow rose from 10,825 to 11,143. The next trading day the market fell almost 800 points, and we havn’t seen these levels since. Even with last Friday’s gain, the Dow closed just above 8000. Although I hope I’m wrong, I think there’s an excellent chance the market will resume its’ decline tomorrow.
November 24th, 2008 at 2:53 am
I’m not particularly in tune with the market, but I do believe that the market has its rallies on Friday because nobody wants to be depressed and panicy over the weekend. I believe the market will continue it’s downward descent this week (as an average), and another rally will occur on Friday, in the last 2 hours of trading, as it has for the past few weeks.
Wrt. Citi, I think it might get split up and distributed to US Bancorp and perhaps other takers. I would hope that JP Morgan won’t touch it because they already have enough toxicity on their books to work off.
November 26th, 2008 at 1:37 am
Citi is sponsoring the New York Mets and their brand-spanking-new state-of-the-art baseball stadium (CitiField) – to the tune of $400M over 20 years.
Should the Fed be using American taxpayers’ dollars to fund such unnecessarily lavish projects? Is it fair to ask American taxpayers to cover the construction costs of the Mets new ballpark?
Furthermore, what does this say about the Yankees new stadium? Aren’t they relying even more heavily on hard-working taxpaying New Yorkers to fund “The House that Form 1040 Built?”
I’d be very much interested in reading some intelligent investigative reporting from an objective source who explores the true sources of funding for these two MLB stadiums, and which one is ultimately unloading a greater financial burden on the hard-working shoulders of your average tax-paying American/New Yorker.
November 26th, 2008 at 3:19 pm
I agree that these funds should not be used for the stadium. However they may be under contractual obligation.