Citibank......Enron redux?

[marmar]

from Bloomberg:



Citigroup's $1.1 Trillion of Mysterious Assets Shadows Earnings

By Bradley Keoun

July 14 (Bloomberg) -- At an investor presentation in May, Citigroup Inc. Chief Executive Officer Vikram Pandit said shrinking the bank's $2.2 trillion balance sheet, the biggest in the U.S., was a cornerstone of his turnaround plan.

Nowhere mentioned in the accompanying 66-page handout were the additional $1.1 trillion of assets that New York-based Citigroup keeps off its books: trusts to sell mortgage-backed securities, financing vehicles to issue short-term debt and collateralized debt obligations, or CDOs, to repackage bonds.

Now, as Citigroup prepares to announce second-quarter results July 18, those off-balance-sheet assets, used by U.S. banks to expand lending without tying up capital, are casting a shadow over earnings. Since last September, at least $100 billion of assets have flooded back onto Citigroup's balance sheet, accompanied by more than $7 billion of losses.

``If you start adding up all the potential exposures, it's a huge number,'' said Sam Golden, a former ombudsman for the U.S. Office of the Comptroller of the Currency who now heads the financial-industry practice for restructuring adviser Alvarez & Marsal in Houston. ``The banks will say that it was disclosed. Investors are saying, `Yeah, but it was cryptic. We really didn't know what you were telling us.'''

U.S. banks already are reeling from more than $165 billion of writedowns and credit losses, so shareholders are wary of unknown obligations that might force them to take responsibility for additional troubled assets. The risks have become so obvious that accounting officials are proposing new rules -- some of which Citigroup opposes -- that would force many assets back onto balance sheets. ......(more)

The complete piece is at: http://www.bloomberg.com/apps/news?pid=20601109&sid=a1liVM3tG3aI&refer=home

[JCMach1]

1. Looks like the UAE will have to bail-out CITI again...

[Ichingcarpenter]

2. Citigroup and Phil Gramm were some of the major player who help repeal Glass-Steagall

Here is the History of the Bill that came out of the Great Depression
and the people and powers who destroyed the Act in 90s



http://www.progressivehistorians.com/2007/11/bill-clintons-role-in-mortgage-crisis.html

[alcibiades_mystery]

3. I agree that this whole mess derives from the repeal of Glass-Steagall

The simple fact is that the conservative economic ideologues were wrong on just about everything. Capitalism, as they conceive it, is just as inoperable as the socialism envisioned by Lenin. More so, even, since it throws the world into crisis after crisis. Since the repeal of Glass-Steagall, we've had three financial sector meltdowns that correspond specifically with actions that would have been prohibited by Glass-Steagall. It was good law for maintaining financial equilibrium with modest growth, but bad law for promoting reckless speculation characterized by massive conflict-of-interest among the banks and finance houses. The rather obvious fact is that Gramm-Leach-Bliley has been a fucking disaster in this country, and a disaster that is now expanding and taking down sectors one by one. It is a modification devised by profiteers and ideologues. Hell, Enron went bust within two and half years of the passage of G-L-B. We were in full-blown financial crisis relating directly to actions that were prohibited by Glass-Steagall within two years of its modification! You'd think that would have taught the fucking ideologues something, but no. And so six years later we are in severe financial crisis yet again, and for the same reasons of reckless speculation and obvious conflict of interest. It's truly fucking ridiculous.