Monday, November 24, 2008

Well, It's a Good Deal for Citibank

Not so much for you and I or your kids or your grandkids.

This guy represents how I feel about all of these bailouts. Wow, that's going to leave a mark.

The details via Bloomberg....

"Citigroup Inc., facing the threat of a breakup or sale, received $306 billion of U.S. government guarantees for troubled mortgages and toxic assets to stabilize the bank after its stock fell 60 percent last week.

Citigroup also will get a $20 billion cash injection from the Treasury Department, adding to the $25 billion the company received last month under the Troubled Asset Relief Program. In return for the cash and guarantees, the government will get $27 billion of preferred shares paying an 8 percent dividend. Citigroup rose 53 percent to $5.75 at 8:37 a.m. in New York trading today. "

Guarantees for $306 billion!!! Where is the outrage? Citibank was not a quasi-government agency but now their bad bets are guaranteed by you and I. Unbelievable. I'm stunned at the lack of real reporting that is going on around this subject. No one bothers to read the term sheet, everyone just picks up the same talking points off Bloomberg and recycles them.

Also, I wasn't a proponent of the $25 billion going to the auto companies, but Detroit has to be steaming today as the Fed's found it necessary to throw another $20 billion at Citibank (on top of the $25 billion they gave them about 4 weeks ago) with about 10 minutes of discussion over the weekend (no Congressional hearings necessary).

I think it's clear that we are in uncharted waters....

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Separately, the homebuilders are coming to Washington begging for their own bailout.

The Commercial Real Estate lobby will probably try to get in on some of that $$$.

Builders Make A Plea For Federal Aid

"The builders' lobby is ramping up its sales pitch for a $250 billion stimulus package called "Fix Housing First," arguing that financial markets won't recover until home prices stop falling. They are calling for a generous tax credit for home purchases and a federal subsidy that would lower a homeowner's mortgage rate."

Hey, it's just another $250 billion. I can't reiterate enough - we have an excess of housing inventory that can not be "fixed" through financial games. Over the next two decades if we re-emerge as a global economic force, creating jobs in high growth industries then housing inventory will be reduced as demand picks up. Artificially stimulating demand through tax breaks is a silly concept that benefits only one group - the builders.

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