#1 Citigroup collapses! Banking Shutdown Possible (plus how to protect yourself)
11-24-2008, 06:29 PM
- Join Date
- Aug 2005
Citigroup collapses! Banking Shutdown Possible (plus how to protect yourself)
It pains me deeply to announce that, despite the massive government rescue, yesterday’s collapse of Citigroup could ultimately lead to a shutdown of the global banking system.
For many years, I hoped this would never happen, and I thought we might be able to avoid it.
Indeed, that’s why, my firm, Weiss Research, first began rating the safety of the nation’s banks in the early 1980s, and why I later founded Weiss Ratings, a separate subsidiary dedicated exclusively to safety ratings — on thousands of banks, insurance companies, brokerage firms, mutual funds and stocks.
I subsequently sold the Weiss Ratings subsidiary to Jim Cramer’s organization, TheStreet.com; and today, my former company is called TheStreet.com Ratings. I continue to own and run Weiss Research, Inc., the publisher of Money and Markets. Moreover, Weiss Research continues to review all financial institutions for their safety; and to support that effort, we acquire TheStreet.com’s ratings and data for our analysts.
For you, the benefit is that you can now get these independent and accurate ratings for free on the Internet. Plus, you can check our free updated lists of the strongest and weakest bank and insurance companies on our Money and Markets website.
My philosophy was that, to find safety, your primary task was to identify the weak institutions, move your money to the strong ones, and then monitor them periodically to make sure your money was still safe. If all of us — savers, investors, bankers and banking regulators — used this kind of objective data to make rational, informed decisions, we would reward the safest institutions and help prevent the growth of the riskiest. Not only would we be safer individually, but our banking system as a whole would be more solid.
Unfortunately, however, that’s not how history has unfolded.
Few people were interested in bank ratings; they blindly assumed all banks were safe. And over the years, regulators have followed a parallel path. Rather than proactively restrict or shut down the weakest, large institutions, they have encouraged their massive growth, making it very difficult for the smaller, safer institutions to compete.
More recently, in the wake of the biggest financial failures in history — Bear Stearns, Lehman Brothers, Washington Mutual, Wachovia and others — rather than liquidate the failed firms’ bad assets, the authorities have been engineering shotgun mergers. The end result is that they have been sweeping most of the bad assets under the carpet of larger banks like Bank of America, Citigroup, and JPMorgan Chase, each of which already had abundant bad assets of its own. Adding insult to injury, Treasury Secretary Paulson’s decision this month — not to buy up the bad assets from many of these banks — has only heightened this concern. Rather than dispose of the toxic waste, the regulators have been rolling up the garbage to the larger banks.
And now, here we are, nearing the end of the road with the largest banks of all endangered and with no larger bank that can swallow them up. It’s a day of reckoning that leaves me no choice but to issue this three-part warning:
Despite the U.S. government’s massive Citigroup bailout, it is going to be difficult for the global banking system to survive the shock to confidence for very long.
Even if insured depositors do not pull out their funds, uninsured institutional investors are likely to run with their money, threatening to bring the system down.
And alas, even if you have your money in a safe bank with full FDIC coverage, you could be adversely impacted.
How will the events unfold? That’s a massively complex question that demands an extremely cautious and thoughtful answer. That’s why, this past August, we devoted a full hour to this question in our “X” List video, naming the most likely candidates for bankruptcy. So let me review its primary conclusions and then take this discussion to the next level.
Most prominent on our August “X” List was Citigroup, America’s second largest banking conglomerate with over $2 trillion in total assets. The bank was already suffering crushing losses in mortgages. But at mid-year, it still had close to $200 billion in other mortgages on its books, denoting the strong possibility of many more to come.
In addition, Citigroup had a massive portfolio of credit cards — 185 million accounts worldwide — that we felt could be the final nail in its coffin. Even before the most recent episode of the global financial crisis, Citigroup’s losses on bad credit cards had surged by 67% from a year earlier. Worse, the number of credit cards 90 days past due was going through the roof, foreshadowing more large losses on the way. All of these weaknesses were detailed in Citigroup’s financial statements. Not detailed, however, was …
The Highly Dangerous Derivatives
Derivatives are bets made mostly with borrowed money. They are bets on interest rates, bets on foreign currencies, bets on stocks, bets on corporate failures, even bets on bets. The bets are placed by banks with each other, banks with brokerage firms, brokers with hedge funds, hedge funds with banks, and more.
They are often high risk. And they are huge. According to the U.S. Comptroller of the Currency (OCC), on June 30, 2008, U.S. commercial banks held $182.1 trillion in notional value (face value) derivatives.1 And, according to the Bank of International Settlements (BIS), which produced a tally six months earlier for the entire world, the global pile-up of derivatives, including institutions in the U.S., Europe and Asia, was more than three times larger — $596 trillion.2
That was ten times the gross domestic product of the entire planet … more than 40 times the total amount of mortgages outstanding in the United States … nearly 60 times greater than the already-huge U.S. national debt.snip
Last edited by megimoo; 11-24-2008 at 06:32 PM.
11-24-2008, 07:23 PM
I have a Citi MasterCard and a Citi Visa.
Dealing with those absolute IDIOTS just regarding those cards tipped me off to the fact they were in trouble some time ago.
Citi MasterCard actually tried the old "hold the payment until it's late" trick. They were too stupid to realize they had cashed the check 5 days before the payment was due.
rm -rf obama*
11-24-2008, 07:24 PM
- Join Date
- May 2005
megimoo, isn't it true that there is 66 trillion dollars in derivatives still out there with only a trillion being written off as of this time?
What is sad is that no one is going to jail. Former Clinton Treasury Secretary Robert Rubin was the power behind the throne at Citi for Sandi Weill and Chuck Prince, but he is still looked upon as a savior for Wall Street. He advocated for the repeal of Glass Stegall as well as for financial deregulation under the Gramm- Bailey Bill in 1998. Yet he is politically connected, so expect little or no sanctions on him.
11-24-2008, 07:29 PM
- Join Date
- May 2005
wiegenliedGuest11-24-2008, 09:03 PM
11-24-2008, 09:28 PM
- Join Date
- May 2005
11-25-2008, 02:12 AM
Where did that nonsense come from?
Citi is not going ANYWHERE. The Feds won't let it.
And have you seen their assets?! They are larger than most GDPs of the world.**** Obama and **** you too.
wiegenliedGuest11-25-2008, 04:01 AM
Regarding Rubin and Weill, nobody knows whether or not the conflict of interest existed. But newspaper said that they had not discussed Rubin’s future when he was at the Treasury department; Weill raised the offer of the job in Mid-September, more than two months after Rubin resigned his post. Rubin also said he played a role in arranging the final compromise that led to the repeal of Glass Steagal, but he said that had nothing to do with his decision to join the company. The newspaper also said he discussed jobs with AIG and Warburg before agreeing to join Citigroup. Also, why did he point out loudly that Weill was buying the government if indeed he corrupted? I think it was Weill who wanted to employ Rubin the most. First, Rubin (as most government officials) could bring priceless contacts to the bank, and second at that time Weill and Reed had difficulty to work together, and probably by bringing Rubin in they thought they could solve that problem.
But of course because I am not an insider, I do not really know what really happened there. Somehow after reading his book “In an Uncertain World”, I thought he was a good man. I might be wrong though, but that’s why I am posting.
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