Rhunzzz

Nationalization: Why Continental Illinois Isn't Relevant

This is such a ridiculous and contemptible argument.

Just because William Isaac was there doesn't make him right in this instance. Just because Felix Salmon may not have managed anything larger than his 401k doesn't make him wrong in this instance.

Ad hominem makes you feel smart, but completely misses the issues.

On Feb 24 12:24 PM klarsolo wrote:

> Hmm, who are we to believe: a financial blogger who never managed
> a dime in his life (except maybe his 401(k)) and only read about
> Continental Illinois or a guy that was actually there?

Untangling the Citi Speculation

It's really pretty simple. The news was deliberately leaked to the press as though it were a done deal. Citi was trying to pressure the government into bailing out its shareholders (as described by Henry Blodget in the link).

Time to Buy Bank Stocks

Well the problem is this - the toxic assets have to go, it's that simple.

And as long as the Obama administration does anything that does not involve overpaying for toxic assets (which would be political suicide), shareholder equity in the banks holding those assets will be hurt.

Let's run through the options:

1. Nationalization - 'nuff said.

2. Stealth nationalization - the Treasury takes a stake in the banks in return for injecting new capital, clearing out the toxic assets, guarantees, etc. This would dilute shareholders.

3. Delayed nationalization - the Treasury gets warrants or preferred stock convertible to common stock, in return for capital injections, clearing out the toxic waste, guarantees, etc. This would still dilute shareholders, albeit over a longer period. It would still hurt shareholders unless the share price is rising.

Who Will Take Over Citi?

CRAZY. At time of writing, Citigroup's share price is lower than Wachovia's! Yeah, that's only psychological, but even so, Citigroups' market capitalization is only three times larger than Wachovia's. The largest bank in the world, worth only three times as much as Wachovia??? This market has gone delirious.