Dean Baker: Would Citigroup Be Bankrupt Without Money from the Fed?

[marmar]

from The American Prospect:



Would Citigroup Be Bankrupt Without Money from the Fed?

I don't know the answer to that question, nor do I think anyone else does, except for the top management at Citigroup and a few people at the Fed. Under the rules of the Federal Reserve Board's Term Auction Facility (TAF), Citigroup, or any bank, can borrow money at an interest rate that is below the discount rate, and put up mortgage backed securities, which could be nearly worthless, as collateral.

This sounds like a good deal if you can get it. Do we want to keep our major banks operating? Of course we do, but don't we want to replace the incompetent managers that ran them into the ground and make the shareholders take their full hit? After all these people don't share their huge salaries or the gains on their stock in good times with the rest of us.

There is an even more fundamental issue. If you were one of the insiders at Citigroup who knew that the Fed was keeping the bank alive on life support, would you short Citigroup stock? Being the cynic I am, my guess is that some people in this position would short the stock, essentially burning the current shareholders for not having the same inside knowledge.

The reality of course is that none of us knows the real situation at Citigroup or any other bank that the Fed may be keeping alive with its TAF. If a bank that is borrowing heavily at the TAF goes under, it would be the next big scandal in the financial world. It would be reasonable for reporters to do some poking around and to ask Fed Chairman Ben Bernanke why he feels the need for such secrecy. Did the country get in this mess because we had too much transparency?

--Dean Baker

Posted by Dean Baker on March 7, 2008 2:38 PM


http://www.prospect.org/csnc/blogs/beat_the_press_archive?month=03&year=2008&base_name=would_citigroup_be_bankrupt_wi

[sicksicksick_N_tired]

1. OH! OH! OH! Let us add whether the stupid decisions had been made if the CEOs hadn't been paid,...

,...so much money,...EVEN IN FAILURE!

:rofl:

Of course, the money-mongers resolutely state, "absolutely NOT",...none of this would have been different had the profiteering scheme been squashed!

:rofl:

I wish I could say this crap doesn't shock me anymore,...but, FUCK, it's amazing how they continue to get away with absurd bullshit WITHIN THEIR OWN GAME.

YUCK! GRRR!!!! :mad:

[DemocratInSoCal]

2. Seriously, What Would You Put Money On?

Would you bet that they're telling the truth? That things are under control and not that bad? That they're borrowing all this $$$$$$$$$$$$$, Just Because. Nothing to see here, move along?

Or would you bet that it's FAAAAAAAAAAAAAAAAR WOOOOOOOOOOORRRRRRRRRSSSSSEEEE than anybody even comprehends?

I'd choose the latter, which is why I'm in Gold, and some foreign currency. It's a speculation I'm willing to take given the track record of these Frickin' CRIMINALS!!

I sincerely hope there's a HELL, and that these FUCKERS spend an eternity there.

[sicksicksick_N_tired]

3. What the FUCK happened to FREE MARKETS!!! Why the bail-outs for the BIG GUYS,...

,...who could provide early retirements to hundreds, maybe thousands on their "income",...rather than REGULATE THOSE EFFERS?

BAH!!!!

The richest of the rich have been flooding this country with an ideology that, "IF YOU GIVE ME MORE MORE MORE,...YOU WILL BENEFIT."

What a crock of caa caa.

Fuck them.

Millions ARE NOT ENOUGH for them as the rest of us struggle on what's left.

FUCK THEM!!!

I watched them testify and defend their salaries before a committee, today. A "welfare queen" could not possibly appear as wretched as these poor, disheartened MILLIONAIRES. POOR FUCKING BABIES!!!

If ever I get enough money, I am gonna make those whores PAY for their benefits off those who suffer.