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Banks Over The Cliff: Citigroup Almost Nationalized

The Wall Street Journal is reporting that Citigroup and the Treasury are in negotiations to sell up to 40% of the bank to the federal government.

This would be the first full scale capitulation of a heretofore "too large to fail" institution. Citgroup was the world's largest financial institution in terms of deposits.

Will Citigroup be President Obama's conduit to force feed mortgage dollars into the consumer credit market, making loans no other private sector institution would make? Incredible as it may seem, I wouldn't be surprised to hear that idea floated in a few months.

Update:: I should have noted that Citigroup is negotiating the terms of the conversion of convertible preferred stock they have already sold to the U S government. The effect of this transaction is to make the federal government the owner of approximately 40% of Citigroup or, said another way, Citigroup is acknowledging what the market has been telling us for months.


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Comments (16)

"Hey look. A slippery slop... (Below threshold)

"Hey look. A slippery slope. Let's hop on it and see what happens."

I'm sure the community orga... (Below threshold)

I'm sure the community organizer will make sure that Citigroup uses the same yardstick that Fannie and Freddie used to 'qualify' home buyers.

Any bets on how many months it will take for Citigroup to go under.......again?

I don't think it's so much ... (Below threshold)

I don't think it's so much a slope as a sheer drop about onto some very sharp rocks.

(We're all joking now, but the end result isn't going to be funny when we're eating one another to get our three squares.)

"Any bets on how many month... (Below threshold)

"Any bets on how many months it will take for Citigroup to go under.......again?"

What, with the "full faith and credit of the United States Government" behind it?

As a Citibank credit card holder, I am now officially scared.

Damn...I don't have a high ... (Below threshold)

Damn...I don't have a high enough balance on my CitiBank credit card...gota go spend some more!

Then after they get nationalized, I'll just start telling them that I'm making my payments to THEM via my income tax withholding!
Piece of cake!

oh well, guess no more citi... (Below threshold)
Harlot Johannson:
Nationalize everything!<br ... (Below threshold)

Nationalize everything!

Only 40%.Barack Hu... (Below threshold)

Only 40%.

Barack Hussein Obama better get busy if he wants to mimic his EU brethren, the Scottish gov just bought a 68% stake in the Royal Bank of Scotland.

I hear a lot of complaints ... (Below threshold)
JC Hammer:

I hear a lot of complaints from Republicans that this bailout plan is going to reward people who made bad decisions. The truth is that the Republicans want to reward people in the banking industry that made bad decisions. It's an old, perhaps somewhat predictable approach that Obama's taking here. At the last minute he's going to allow himself to be dragged, kicking and screaming, into 'nationalization' of the banks, thus proving his often-stated willingness to listen to all ideas and choose the one that makes most sense and (at the time) getting the consummate conservative-Lindsey Graham -to support him (Obama) as he does what, from the very beginning he knew was the right thing.

When Bush and Cheney opened up the Sub Prime market that was fine. But when they DEREGULATED LENDER OVERSIGHT, they opened a Pandora's box, by permitting lenders to lend outside of their means. So now, they have to sell the LIE, that it was US, and NOT THEM, who screwed up. And most Americans are lapping it up like kittens to cream.

How about we try what's been done the last two times, and inject LENDING capital into the banks? FDR did it with his "banking holiday" where he built on Hoovers "Reconstruction Finance Corporation". Reagan did it with the failed savings and loans with his "RESOLUTION TRUST CORPORATION". So why are we talking about nationalizing the banks, when we haven't even tried that yet?

"I hear a lot of complaints... (Below threshold)

"I hear a lot of complaints from Republicans that this bailout plan is going to reward people who made bad decisions. The truth is that the Republicans want to reward people in the banking industry that made bad decisions."

Then, pray tell, why are they 'complaining'?

"When Bush and Cheney opened up the Sub Prime market that was fine."

Check out numerous You-Tube videos of Barney Frank, Maxine Waters, and Gregory Meeks denying that Fannie or Freddie are in any financial trouble. Watch Waters and Meeks play the race card. Check out the Community Redevelopment Act and ACORNS role in it.

"How about we try what's been done the last two times, and inject LENDING capital into the banks?"

Wasn't that TARP 1 & 2? Or have the plans changed again?

Keep hittin' that ganja JC.

The RFC and the RTC did not... (Below threshold)

The RFC and the RTC did not inject "lending capital" into banks, nor did their creation have that effect.

Also, Lindsy Graham is not the "consummate conservative". Arguably, Graham, and his mentor McCain, kept millions of conservatives at home last November.

Sub prime lending originated with the CRA, and oversight is the responsibility of Congress. Blame Bush all you want but he's in Crawford now and Frank/Dodd are still in Congress as chairman of their respective committees that oversee banks and bank regulators.

Where was Tim Geithner when... (Below threshold)

Where was Tim Geithner when he was with the NY Federal Reserve Bank, when Citicorp made these dubious and risky loans and investments? It was his job to ensure that banks within his jurisdiction maintained the safety and soundness of their investments. I guess being the lapdog of Robert Rubin was more important. After all, Obama considered Timmy the tax cheat to be the only person alive who could handle the TARP I and TARP II programs.

In two months, look for Citigroup to be forcibly merged with another failing bank, and that an 'emergency' exists where they'll need another 100 billion dollars.

Also look for several new 'czars' and 'committees' which will be staffed with more Dem operatives to 'oversee' one aspect of the economy or another. Obama has done things the Chicago way...make lots of patronage jobs for your supporters so they can dole out the goodies to specific voters and voting blocks.

JC, thanks for the laugh th... (Below threshold)

JC, thanks for the laugh this Monday morning. You liberals are always good for a laugh with your selective memories and knowledge, but you really cracked me up. ww

Wonderful. My mortgage is ... (Below threshold)

Wonderful. My mortgage is through Citimortgage.

Obama will go down as the w... (Below threshold)
Obama - Worst President Ever:

Obama will go down as the worst president in history if he keeps it up. Clearly, the market has no confidence in him.

Hey, who can blame them, the guy who can't do his takes is going to try to figure out how to turn the market around. Heaven help us.

Obama claims he was given a deficit. Yet, in less than 100 days, he doubled that debt.

Obama's best excuse for his performance is to blame the prior administration. The prior administration had a great GDP up to Dec of 2007 (Q1 to Q4 in 2007 up almost 4%).

Obama is heading us towards massive inflation. He is heading us towards Central America style economics. He's a moron.

Obama is a radical. He is j... (Below threshold)
Obama is a radical.:

Obama is a radical. He is just a good smooth talking radical.

I hate to say this, but those democrats who vote for democrats for no good reason I have a little hint for you. The ghetto will still be the ghetto when Obama leaves office.






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