Citi's Destructive Potential Still Poses Systemic Threat

Monday's handing over of yet more taxpayer money to Citigroup (C) has temporarily avoided a truly systemic breakdown of the world banking system but, as always, the real problems have not been addressed and the inevitable collapse has just been delayed.

Bloomberg reported Tuesday that:

Citigroup will cover the first $29 Billion of pre-tax losses from the $306 Billion troubled assets pool, in addition to reserves it already set aside. Citigroup will accept 10% of losses above that amount with the Government (ie the taxpayer), responsible for 90%. The Treasury is absorbing $5 Billion in losses and the F.D.I.C. absorbing another $10 Billion. If the portfolio plummets, the Fed will come up with a loan for the remainder."

Citigroup has already received $25 Billion under TARP.

Citigroup has 185 million credit card accounts worldwide and even before the current stage of the financial crisis, the increase in losses year on year had surged to 67% with a concurrent increase in accounts 90 days or more past due. Credit defaults are rising and it is inevitable that this major source of income will be reducing all the time. Nothing has occurred to enable the credit card debtors to pay back what they owe or to stop the exponential charges which accumulate when payments are overdue. The longer they are overdue, the more difficult to pay the debt back. So we can assume that Citigroup will be extremely vulnerable on this front and incur more losses.

The above does not include the ever present Pale Horseman of the derivatives world. U.S. Commercial banks alone account for $182.1 trillion in notional derivatives. The frightening thing about this is that only $8.2 trillion is regulated by an Exchange, the rest being over the counter and not subject to any regulation. Mid year 2008, Citibank N.A. held $37.1 trillion in derivative bets with only 6.6% regulated by an exchange. That makes the derivatives exposure of Citi 5 times the exposure that Lehman had when it went to the wall. The fallout from that one is still being felt by banks the world over.

The danger of these derivatives rises as the economy worsens and who will pick up the bill when the inevitable debacle arrives? The taxpayer, who should be getting something tangible for their hard earned tax dollars such as a real easing of their debt, a chance to keep their homes, investment in creating real jobs in production, not the publicly funded largesse to Paulson's cronies on Wall St. that they have been subject to so far.

The maladroit policies of the Treasury continue to take precedent over common sense. This, despite the mea culpas by Paulson himself, admitting that his cunning plan was not improving the situation.

Does anyone in Washington even think of the real economy anymore or do they mistakenly assume that they can just throw Fiat Money at Financial Institutions in the hope it will go away? The ability of the U.S. to continue to throw this money down the drain still relies on the willingness of China, Japan and the Oil kingdoms and they will be seeing the yields on Treasuries slip down to the level where inflation will erode their gains. Gold is making a comeback in reserves as an inflation proof asset. These latter countries also have to deal with their own economic disasters and need to have real money to address the issues, not promises from a fundamentally bankrupt entity to pay them back the money.

The growing distance between East and West augurs badly for the U.S. The coalescence of countries into regional blocks, with their associated pragmatism, is a sign of things to come. How the U.S. attacks its real economic problems will be determined by the wisdom of some and the patience of others.

Whichever way you look at it, the U.S. must drastically lower living standards and expectations commensurate with its debt and existing production infrastructure to rebuild its competitiveness. The exposure of the U.S. taxpayer to the toxicity of Citigroup's "Assets" has only served to accelerate this downward trajectory.

Comments

[investfarm:]

Congressman Charles B. Rangel of New York, the first African American chairman of the House Ways and Means Committee, and a leading Democrat who represents the Franklin D. Roosevelt impulse inside the Congress, is the target of an ongoing British bankers-directed character assassination. The attack is nothing less than a British operation to shred the U.S. Constitution with an assault on Congress, in the midst of the worst financial crisis in history.

That the attack--led by the {New York Post} and the {New York Times}--comes the same week as the Citibank bailout engineered by Treasury Secretary Henry Paulson is no accident. Despite all of Paulson's assurances, Citibank is just the first of many, many more mega-bailouts, and just like before, Rangel is being targetted because he is an obstacle, who threatens to block the financier schemes to impose fascist looting on the population, while doling out un-Constitutional bailouts to the speculators. In the summer of 2008, the unlimited bailout of Fannie-Freddie, announced by Paulson on Sept. 7, 2008, which is tantamount to treason, had been rejected by Rangel's committee earlier. Rangel and his committee limited Paulson's ``bazooka'' to $800 billion, and insisted on making it transparent, by raising the U.S. debt ceiling from $9.6 trillion to $10.4 trillion.

Now, with the financial crisis escalating, so is the attack on Rangel. The {New York Post,} owned by the Queen's own Rupert Murdoch, relaunched its attack on Nov. 23, shortly after Rangel was renamed Chairman of the Ways and Means Committee. The financiers' cabal had hoped that Rangel would be purged as part of a Pelosi shakeup that ousted Rep. John Dingell (D-MI), the long-time head of the House Energy Committee. Many House members opposed the replacement of Dingell, including Rangel, who said, ``This is the burial of the seniority system. I would be surprised if I was challenged, for the same reason that Mr. Dingell was very surprised.''

As in the Summer, 2008, the New York ``Post and Times'' assault on Rangel has been based on innuendo. On Nov. 23, the "Post and Times" reported supposed tax fraud where Rangel claimed a ``homestead'' tax status for a home in Washington, D.C., but "the property was sold more than eight years ago'' and Rep. Rangel's accountant has been asked to "retrieve the records about it," said a spokesman. Then, on Nov. 25, the {Times} hit with their version of a heavy weapons attack--a front page story, with a full page jump, saying that Rangel favored legislation in 2007 that opposed retroactive tax increases for U.S. companies that registered offshore, and that this helped a company called Nabors Industries by preserving its tax shelter. Before and after the legislation, a Nabors executive gave contributions to a library at the City College of New York (CCNY), for which Rangel had requested charitable contributions from some 47 corporations reported the {Times}. But the Times admits that Rangel has strongly opposed legislation for retroactive tax increases.

2008 Nov 26 04:17 AM

[investfarm:]

You Damn Fools: You Should Put This Thing into Bankruptcy!

Wall Street insiders know that last Sunday's $269 billion second bailout of Citigroup was intended to be only the first of a series, which will embrace most or all of the major banks. And that Sunday Citigroup fiasco was followed by Paulson's announcement Tuesday of an $800 billion Federal Reserve program to buy junk paper, making a total of over $1 trillion in new "bailout" commitments over a mere three days, and bringing the total up to about $8.5 trillion so far (over half of GDP), in the U.S. alone!

In this setting, Lyndon LaRouche said today: "Why don't they try bankruptcy? We should put this out clearly: You damn fools; you should put this thing in bankruptcy! You don't have enough money in the universe to pay this bill! So why don't you admit it! We should say that; exactly that. We shouldn't do any reporting of this stuff, because reporting it is being impotent in the face of it. Just say that there's not enough money in the universe to pay this damn bill. They can't do it; they should declare bankruptcy, and just cancel all these damn derivatives. We'll protect the firms that are driven into bankruptcy, in bankruptcy reorganization. We have no other course except to put this thing into bankruptcy.

"We're about to launch the greatest hyperinflationary burst in modern history," he continued, "unless we stop this. We're on the verge of a hyperinflationary explosion; they've been trying to conceal this hyperinflationary thing by various tricks so far. Now it can't work any more! So they've got to put the thing into receivership! Put it into bankruptcy now! That should be your headline on everything. There is nothing to do with this thing except put it into bankruptcy. Paulson, stop being a Christian Scientist! Take your medication! Don't be a Christian Scientist all your life; take your medicine!

"This is not just U.S.," LaRouche went on. "This is international. As I had warned, this is now going into a hyperinflationary phase. And if you don't want to blow out the world system, you're going to put the damn thing into bankruptcy now! You're going to put the legitimate banks under bankruptcy protection, now! No protection for derivatives, none! But the banks which may be put normally into bankruptcy as a result of that, are put under bankruptcy protection, and the derivatives payments are suspended.

"What that does, that's life and death time," he emphasized. "If you don't do it, you're going to lose the country! Are you going to do it?-- That's the whole point!

Look, you damn fools,-- you don't know anything! This is the guy that knows what he's talking about; you damn fools haven't known what you were talking about all along! Now, this is what you're going to do if you've got any brains left! "And Paulson," LaRouche said, "I don't care if he's a Christian Scientist or not; he's going to take his medicine! Bankruptcy!

"Bush may not like it," he continued, "but that's what you have to do! And, if you don't like the result, mail the bill to Bush! The Bush Administration itself, is going totally with the British line. And don't let this lame duck shit on your economy!

"The main thing is, my statement should just dominate everything," LaRouche told his associates. "Don't pollute it by coming up with other discussions and explanatory notes, which is what the usual mistake is. In this case, just say, as I've been warning, the hyperinflation is being unleashed. It's being unleashed over this Citibank thing, and this is the time to stop the bullshit. The policy must be to put Citibank and other banks under bankruptcy protection of their normal banking functions, which means freezing all claims based on the speculative investments called derivatives. No bailout for derivatives! Freeze them! Put the whole thing into bankruptcy and supply the protection to the regular functions of the banks. Then you don't have to pay out all that money, you damn fools! You don't have to put a nickel more into bailouts! Just put the thing under bankruptcy protection as I've told you all along, you damn fools!

"Now, you damn fools, do as I told you!" LaRouche concluded. "You did it your way, and that was wrong, and now it's a hopeless case! You've got to do it now my way!"

2008 Nov 26 04:26 AM

[Crookedwood:]

The fact that poor decision made at citi by Ruben and others now is compounded by Paulson and Bush tunnel vision. Money without regulation and parameters for management oversight leads now to one place, hyper-inflation. Would bankruptcy be less costly to the country than the pain of super-inflation? I think so. Crookedwood

2008 Nov 26 10:43 AM

[Emerald:]

What nonsense! Rangel,is an old style politician who "didn't know" 1.) he had four contiguous rent stabilized apartments, 2.) didn't know he received benefits from his Dominican Republic condo and 3.) didn't trade contribution favors for a tax break for an oil driller so he could have his name on a public university building. If you say so.....


On Nov 26 04:17 AM investfarm wrote:

> Congressman Charles B. Rangel of New York, the first African American
> chairman of the House Ways and Means Committee, and a leading Democrat
> who represents the Franklin D. Roosevelt impulse inside the Congress,
> is the target of an ongoing British bankers-directed character assassination.
> The attack is nothing less than a British operation to shred the
> U.S. Constitution with an assault on Congress, in the midst of the
> worst financial crisis in history.
>
> That the attack--led by the {New York Post} and the {New York Times}--comes
> the same week as the Citibank bailout engineered by Treasury Secretary
> Henry Paulson is no accident. Despite all of Paulson's assurances,
> Citibank is just the first of many, many more mega-bailouts, and
> just like before, Rangel is being targetted because he is an obstacle,
> who threatens to block the financier schemes to impose fascist looting
> on the population, while doling out un-Constitutional bailouts to
> the speculators. In the summer of 2008, the unlimited bailout of
> Fannie-Freddie, announced by Paulson on Sept. 7, 2008, which is tantamount
> to treason, had been rejected by Rangel's committee earlier. Rangel
> and his committee limited Paulson's ``bazooka'' to $800 billion,
> and insisted on making it transparent, by raising the U.S. debt ceiling
> from $9.6 trillion to $10.4 trillion.
>
> Now, with the financial crisis escalating, so is the attack on Rangel.
> The {New York Post,} owned by the Queen's own Rupert Murdoch, relaunched
> its attack on Nov. 23, shortly after Rangel was renamed Chairman
> of the Ways and Means Committee. The financiers' cabal had hoped
> that Rangel would be purged as part of a Pelosi shakeup that ousted
> Rep. John Dingell (D-MI), the long-time head of the House Energy
> Committee. Many House members opposed the replacement of Dingell,
> including Rangel, who said, ``This is the burial of the seniority
> system. I would be surprised if I was challenged, for the same reason
> that Mr. Dingell was very surprised.''
>
> As in the Summer, 2008, the New York ``Post and Times'' assault on
> Rangel has been based on innuendo. On Nov. 23, the "Post and Times"
> reported supposed tax fraud where Rangel claimed a ``homestead''
> tax status for a home in Washington, D.C., but "the property was
> sold more than eight years ago'' and Rep. Rangel's accountant has
> been asked to "retrieve the records about it," said a spokesman.
> Then, on Nov. 25, the {Times} hit with their version of a heavy weapons
> attack--a front page story, with a full page jump, saying that Rangel
> favored legislation in 2007 that opposed retroactive tax increases
> for U.S. companies that registered offshore, and that this helped
> a company called Nabors Industries by preserving its tax shelter.
> Before and after the legislation, a Nabors executive gave contributions
> to a library at the City College of New York (CCNY), for which Rangel
> had requested charitable contributions from some 47 corporations
> reported the {Times}. But the Times admits that Rangel has strongly
> opposed legislation for retroactive tax increases.
>

2008 Nov 26 10:59 AM

[sumosama:]

Yeah, and none of this has to do with Rangel's frequent lapses in ethics...or this article.


On Nov 26 04:17 AM investfarm wrote:

> Congressman Charles B. Rangel of New York, the first African American
> chairman of the House Ways and Means Committee, and a leading Democrat
> who represents the Franklin D. Roosevelt impulse inside the Congress,
> is the target of an ongoing British bankers-directed character assassination.
> The attack is nothing less than a British operation to shred the
> U.S. Constitution with an assault on Congress, in the midst of the
> worst financial crisis in history.
>
> That the attack--led by the {New York Post} and the {New York Times}--comes
> the same week as the Citibank bailout engineered by Treasury Secretary
> Henry Paulson is no accident. Despite all of Paulson's assurances,
> Citibank is just the first of many, many more mega-bailouts, and
> just like before, Rangel is being targetted because he is an obstacle,
> who threatens to block the financier schemes to impose fascist looting
> on the population, while doling out un-Constitutional bailouts to
> the speculators. In the summer of 2008, the unlimited bailout of
> Fannie-Freddie, announced by Paulson on Sept. 7, 2008, which is tantamount
> to treason, had been rejected by Rangel's committee earlier. Rangel
> and his committee limited Paulson's ``bazooka'' to $800 billion,
> and insisted on making it transparent, by raising the U.S. debt ceiling
> from $9.6 trillion to $10.4 trillion.
>
> Now, with the financial crisis escalating, so is the attack on Rangel.
> The {New York Post,} owned by the Queen's own Rupert Murdoch, relaunched
> its attack on Nov. 23, shortly after Rangel was renamed Chairman
> of the Ways and Means Committee. The financiers' cabal had hoped
> that Rangel would be purged as part of a Pelosi shakeup that ousted
> Rep. John Dingell (D-MI), the long-time head of the House Energy
> Committee. Many House members opposed the replacement of Dingell,
> including Rangel, who said, ``This is the burial of the seniority
> system. I would be surprised if I was challenged, for the same reason
> that Mr. Dingell was very surprised.''
>
> As in the Summer, 2008, the New York ``Post and Times'' assault on
> Rangel has been based on innuendo. On Nov. 23, the "Post and Times"
> reported supposed tax fraud where Rangel claimed a ``homestead''
> tax status for a home in Washington, D.C., but "the property was
> sold more than eight years ago'' and Rep. Rangel's accountant has
> been asked to "retrieve the records about it," said a spokesman.
> Then, on Nov. 25, the {Times} hit with their version of a heavy weapons
> attack--a front page story, with a full page jump, saying that Rangel
> favored legislation in 2007 that opposed retroactive tax increases
> for U.S. companies that registered offshore, and that this helped
> a company called Nabors Industries by preserving its tax shelter.
> Before and after the legislation, a Nabors executive gave contributions
> to a library at the City College of New York (CCNY), for which Rangel
> had requested charitable contributions from some 47 corporations
> reported the {Times}. But the Times admits that Rangel has strongly
> opposed legislation for retroactive tax increases.
>

2008 Nov 26 02:03 PM

[sumosama:]

R U serious? You are actually quoting Lyndon LaRouche???


On Nov 26 04:26 AM investfarm wrote:

> You Damn Fools: You Should Put This Thing into Bankruptcy!
>
> Wall Street insiders know that last Sunday's $269 billion second
> bailout of Citigroup was intended to be only the first of a series,
> which will embrace most or all of the major banks. And that Sunday
> Citigroup fiasco was followed by Paulson's announcement Tuesday of
> an $800 billion Federal Reserve program to buy junk paper, making
> a total of over $1 trillion in new "bailout" commitments over a mere
> three days, and bringing the total up to about $8.5 trillion so far
> (over half of GDP), in the U.S. alone!
>
> In this setting, Lyndon LaRouche said today: "Why don't they try
> bankruptcy? We should put this out clearly: You damn fools; you should
> put this thing in bankruptcy! You don't have enough money in the
> universe to pay this bill! So why don't you admit it! We should say
> that; exactly that. We shouldn't do any reporting of this stuff,
> because reporting it is being impotent in the face of it. Just say
> that there's not enough money in the universe to pay this damn bill.
> They can't do it; they should declare bankruptcy, and just cancel
> all these damn derivatives. We'll protect the firms that are driven
> into bankruptcy, in bankruptcy reorganization. We have no other course
> except to put this thing into bankruptcy.
>
> "We're about to launch the greatest hyperinflationary burst in modern
> history," he continued, "unless we stop this. We're on the verge
> of a hyperinflationary explosion; they've been trying to conceal
> this hyperinflationary thing by various tricks so far. Now it can't
> work any more! So they've got to put the thing into receivership!
> Put it into bankruptcy now! That should be your headline on everything.
> There is nothing to do with this thing except put it into bankruptcy.
> Paulson, stop being a Christian Scientist! Take your medication!
> Don't be a Christian Scientist all your life; take your medicine!
>
>
> "This is not just U.S.," LaRouche went on. "This is international.
> As I had warned, this is now going into a hyperinflationary phase.
> And if you don't want to blow out the world system, you're going
> to put the damn thing into bankruptcy now! You're going to put the
> legitimate banks under bankruptcy protection, now! No protection
> for derivatives, none! But the banks which may be put normally into
> bankruptcy as a result of that, are put under bankruptcy protection,
> and the derivatives payments are suspended.
>
> "What that does, that's life and death time," he emphasized. "If
> you don't do it, you're going to lose the country! Are you going
> to do it?-- That's the whole point!
>
> Look, you damn fools,-- you don't know anything! This is the guy
> that knows what he's talking about; you damn fools haven't known
> what you were talking about all along! Now, this is what you're going
> to do if you've got any brains left! "And Paulson," LaRouche said,
> "I don't care if he's a Christian Scientist or not; he's going to
> take his medicine! Bankruptcy!
>
> "Bush may not like it," he continued, "but that's what you have to
> do! And, if you don't like the result, mail the bill to Bush! The
> Bush Administration itself, is going totally with the British line.
> And don't let this lame duck shit on your economy!
>
> "The main thing is, my statement should just dominate everything,"
> LaRouche told his associates. "Don't pollute it by coming up with
> other discussions and explanatory notes, which is what the usual
> mistake is. In this case, just say, as I've been warning, the hyperinflation
> is being unleashed. It's being unleashed over this Citibank thing,
> and this is the time to stop the bullshit. The policy must be to
> put Citibank and other banks under bankruptcy protection of their
> normal banking functions, which means freezing all claims based on
> the speculative investments called derivatives. No bailout for derivatives!
> Freeze them! Put the whole thing into bankruptcy and supply the protection
> to the regular functions of the banks. Then you don't have to pay
> out all that money, you damn fools! You don't have to put a nickel
> more into bailouts! Just put the thing under bankruptcy protection
> as I've told you all along, you damn fools!
>
> "Now, you damn fools, do as I told you!" LaRouche concluded. "You
> did it your way, and that was wrong, and now it's a hopeless case!
> You've got to do it now my way!"
>

2008 Nov 26 02:05 PM