Sunday, November 23, 2008

I Want to Dump My Bad Business on Feds as Well.

Citigroup seems to be edging back from the brink by working with the Federal government to separate it's good bank from it's bad bank. The Federal Government will apparently step in to assume losses beyond a specified amount.

Hey, this could work for a lot of businesses!!

* Good GM (Malibu, Chevy Volt)/Bad GM (Hummer, Healthcare, Pensions)
* Good Disney (Parks, ESPN)/ Bad Disney (ABC, Disney Stores)
* Good Google (Blogger, Maps, Search)/ Bad Google (adsense, data mining, gmail)

"Federal regulators on Sunday were working toward a rescue plan for Citigroup, whose stock has plunged in recent days over fears of its exposure to toxic mortgage assets, according to a source familiar with the talks.

Details remained unclear Sunday evening and several reports stressed that a deal could still fall apart. But the plan reportedly centers around a government guarantee of some of Citigroup's loans. Under such an arrangement, the government would back loan-losses above a certain level. The goal: Restore confidence in Citigroup's viability.

An announcement could come as early as Sunday evening, according to several reports."

The futures are up late Sunday night on news that a deal is in the works. We'll see what happens.

Also, look from word this week from the incoming administration on their plans for stimulus part 2. I'm concerned by the initial direction of the plans put forth, but the markets will likely love any sign of stability.

Congress seems determined to send out another check or cut taxes another $500 so you can go buy a 37" flat screen at Walmart, but this crisis was born of 30 years of failed policies and short-sighted planning and won't be fixed by carelessly throwing more money at the problem. Our goal should be to fix things for the graduating class of 2020, not propping up home values in Arizona. Unfortunately, that sort of painful planning is unpopular and is never going to get off the ground. It requires long-term strategic thinking that forgoes the easy payday in exchange for a brighter tomorrow. It's the sort of "We First" thinking that got us through the 30's and 40's, but has been replaced by "Me, First, Second and Last" thinking that has permeated our culture.

Sorry for the rant.

Look for a light posting during the upcoming week.

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