Citibank Bailout: $300 Billion Doesn't Sound Like A Lot Anymore

The Wall Street Journal reports that Citibank (C) has become the latest recipient of a government bailout - this one to the tune of $300 billion, or thereabouts, depending upon how you do the math which, in this case, appears to be quite complicated.

Somehow, $300 billion doesn't sound like a lot of money anymore ... it should.

Yesterday they were talking about a $500 to $700 billion stimulus package that will be on President Obama's desk, ready to sign, on inauguration day.

That must be a new record - a cool trillion in government commitments in a single day.

The federal government agreed Sunday to take unprecedented steps to stabilize Citigroup Inc. by moving to guarantee close to $300 billion in troubled assets weighing on the bank's books, according to people familiar with details of the plan.

Treasury has agreed to inject an additional $20 billion in capital into Citigroup under terms of the deal hashed out between the bank, the Treasury Department, the Federal Reserve, and the Federal Deposit Insurance Corp. Treasury officials will charge a higher interest rate for the capital injection -- 8% for the first few years -- than it has charged to dozens of other banks now borrowing money under the government's the $700 billion rescue package approved by Congress last month.

In addition to the capital, Citigroup will have an extremely unusual arrangement in which the government agrees to backstop a roughly $300 billion pool of its assets, containing mortgage-backed securities among other things. Citigroup must absorb the first $37 billion to $40 billion in losses from these assets. If losses extend beyond that level, Treasury will absorb the next $5 billion in losses, followed by the FDIC taking on the next $10 billion in losses. Any losses on these assets beyond that level would be taken by the Fed.

Well it's a good thing we have the Fed to bat cleanup.

Later in the report they mention $1.23 trillion in "entities" that are still being kept "off the books" at Citibank. Based on their current $2 trillion in "entities" that are "on the books", even more government help may yet be needed.

This video might help to explain why big banks keep getting bailed out. The late Mr. Carlin starts out talking about education but quickly turns his attention to Wall Street.

Favorite line: "It's a big club, and you ain't in it. You and I are not in the big club"

Comments

[Takayama:]

How the mighty has fallen flat in the face.
Investors and regulators should take a key lesson in the way compensation was paid and rewarded to key management staff. Or are they being paid to create this mess for our future generations.

2008 Nov 24 09:44 PM

[Evan R:]

While Citibank is getting bailed out for 300 Billion no questions asked, they are buying toll roads in Spain for 10 Billion. The bailout money was made by transferring money from the poor to the rich through The Fed's inflationary Federal Funds bonds-for-cash mechanism.

Meanwhile we pretend to debate whether or not to give a measly few billion to the auto firms. What a joke, we already know they are going to get it, is their any abuse that Americans won't bend over and take?

If you think for a second that the Fed isn't massively inflating, just wait till most of those assets they are holding turn up worthless, and the compaines keep the money instead of buying back the collateral.

You don't think a company would actually swap there valued assets with the fed do you? Of course not, they are busy unloading trash on there good friends at the Fed.

Let Citibank fail and sell their business units to profitable and well run companies. Our economy doesn't need dead weight dinosaurs like Citibank being supported at the expense of healthy thriving businesses.

2008 Dec 03 11:40 AM

[damari:]

You are welcome but as usual just empty words from her office. Citibank shouldn't be allowed to get away with this and now I have to help pay for theit bailout, just not right. If they will lie to the DFEH and fire a great employee for all the wrong reasons, give out loans to people which really didn't qualify what will they now do with the bailout money, they had still planned to by a plane if The President had not come down on them.

--- On Wed, 2/18/09, Ken McEldowney <ken.mceldowney@con... wrote:

From: Ken McEldowney <ken.mceldowney@con...
Subject: Re: CITIBANK BAILOUT IS A JOKE
To: [e-mail]
Cc: "linda.sherry@consumer... <[e-mail]>
Date: Wednesday, February 18, 2009, 8:58 AM

Thanks for sharing the exchange with Sen. Boxer's office.
At 7:36 AM -0800 2/18/09, Damari Stratford wrote:
--- On Fri, 2/13/09, Damari Stratford <[e-mail]... wrote:

From: Damari Stratford <[e-mail]...
Subject: Fw: Re: Responding to your message
To: [e-mail]
Date: Friday, February 13, 2009, 9:33 AM



--- On Fri, 2/13/09, Damari Stratford <[e-mail]... wrote:

From: Damari Stratford <[e-mail]...
Subject: Re: Responding to your message
To: [e-mail].g...
Cc: [e-mail].g...
Date: Friday, February 13, 2009, 9:06 AM

If Citibank is willing to lie to the DFEH a government agency why wouldn't they lie now. I don't feel my tax dollars should go to bail out a bank which treated me and many others so unfairly. Please ask them about the lawsuit which I am also paying for that. Wrongfully terminated by Citibank due to bad and unethical business practice on their part and now we have to bail them out. Who bailed me out when I asked for help? No one. I have been unemployed for 3 years thanks to Citibanks actions. When the DFEH made their decision they made it knowing they had false information, where is the justice in that? Are you really going to help or are these just more emails which no one acts on. I can prove they lied, call me 831-236-0112, Damari Stratford

--- On Thu, 2/12/09, [e-mail].g... <[e-mail]> wrote:

From: [e-mail].g... <[e-mail]>
Subject: Responding to your message
To: [e-mail]
Date: Thursday, February 12, 2009, 1:41 PM



Dear Mrs. Stratford:



Thank you for taking the time to write and share your views with me. Your comments will help me continue to represent you and other Californians to the best of my ability. Be assured that I will keep your views in mind as the Senate considers legislation on this or similar issues.



If you would like additional information about my work in the U.S. Senate, I invite you to visit my website, boxer.senate.gov. From this site, you can send a message to me about current events or pending legislation, access my statements and press releases, request copies of legislation and government reports, and receive detailed information about the many services that I am privileged to provide for my constituents. You may also wish to visit thomas.loc.gov to track current and past federal legislation.



Again, thank you for sharing your thoughts with me. I appreciate hearing from you.
Barbara Boxer
United States Senator

Please visit my website at boxer.senate.gov

I would ask the President to call me before he gives any money to Citibank, they are and practice unethical business. Their lawyers lied to the Department of Fair Employment and Housing, wrongfully terminated me while out on workers comp and all because I wanted to put my daughter first. Now Citibank ask for bail out money from our goverm=nment yet when I wrote to over 200 senators and government people I got no help. They broke California labor codes in the process of firing me, while I was ill. My attorney made over 200,000.00 and checks were sent out to about 2000 people. They want your help but no one would help me and all though they wrongfully terminated. There is greed at Citibank and they knowingly gave mortgages to people who didn't qualify by pumping up their income and now they want my tax dollars. My attorney said firing me cost them about 3.5 million and I don't feel they should get or deserve the bail out money. My story is on line, and President Bush's office never did reply and the people that did just kept passing the buck. Fell free to call me for more details 831-236-0112, or look at the case filed in Monterey Superior court. I lost everything because of them, bad manager Jeff Ursino and they didn't even follow their own firing Stratford, fired via UPS by Citibank
My husband voted for you and had I voted I would have voted for you. I didn't vote because when I tried to get help from people I had voted for no one helped, they say to write your congressman for help and they don't help you, but Citibank asks for bail out money and they get help. where is the justice, what about me, Jeff the plumbers wife? Citibank made the list of the best 100 companies for working mothers to work at, yet they fired me for putting my daughter's needs first! Where is the justice? Why should we bail them out?
I prayed for you all day and watched on my TV, stunning, we are truly blessed to have you. My favorite photo/moment is the thumbs up by your beautiful daughter, which I am sure you also put her needs first. Thanks for caring about our country, God Bless you and your family, may he keep you safe and happy.

Feb 19 07:48 AM

[User 374255:]

The worst is now over for citibank now invest 10,000 shares at .98. and watch your money grow.

Mar 11 10:33 AM

[shastagurl:]

I just discovered that Citibank - you know those people who just got $300,000,000 in bailout money - are now charging even their best customers like me a minimum service charge of $.50. Fifty cents isn't much, but it is the principle of the thing. It is bad enough that me, my children, grandchildren and probably great grandchildren are going probably going to be paying for this bailout. But now we are paying twice. Service charges are supposed to be for people who pay late, not for good customers. I am tearing up my Citibank credit cards because I certainly have plenty of others I can use.

Apr 12 10:53 PM

[eyeoftaurus:]

Citibanks other actions like many banks and credit card companies are becoming to say the least unethical if not not bordering on illegal. I have and many of my friends do to an excellent credit rating and Citibank just raised my credit card interest rate from 12% to 30% stating the economy and government regulations. Yea regulations coming in the next few months to stop this garbage. It is also interesting that before they raised the interest rate the had a "great" offer for their customers. If you paid down your balance by half they would give you $300 credit. Oh my, well guess what my supposition on this is for those (being many) who didn't jump at this great deal they turned around and raised those card holders rates by at least 50%. Going to pay it off and close it, let the Saudis do business with someone else. There will come the day again when credit card companies are begging people to take their cards and products and we should all just say no thanks, we have been bitten once and that is enough.

Oct 10 02:12 PM