Citi Crumbles

Citi is crumbling tonight. The cracks that started the steadily falling debris since the credit bubble burst in July 2007 are giving way to an all-out avalanche leading to implosion from the organization's corrupt corrosive core. But there on the verge of destruction is where it's at its most dangerous, with the high explosives selectively placed so that detonation will bring the entire weight crashing onto the citizens' heads:

Monday 2/23 Politico was reporting that Richard Parsons, the "incoming Chairman" of Citigroup, was seen at the White House at 6:00PM. Politico also confirmed that Mr. Parsons was scheduled to meet with Valerie Jarrett, one of President Obama's chief advisors.

While Ms. Jarrett is an attorney, there is nothing in her published resumes that indicates that she has much experience in banking. As a result, we can all worry that Citigroup's representative will sell her a bill of goods that she will pitch to President Obama.

After I read the Politico story, I went on Wikipedia to learn Richard Parsons' background.

In Wikipedia, Mr. Parsons is listed as an Obama friend and campaign economic advisor. It seems to me that there is a profound conflict of interest in Mr. Parsons acting in that capacity, while at the same time being the "incoming Chairman of Citigroup", a significant debtor of the Federal government.

So two ol' friends are cooking the books in DC to stir up something thick enough to stop the bleeding after a $300 billion bailout in November and $45 billion before that failed to. But what kind of brew could possibly fix it? Surely cost cutting could not help, could it?

Looking forCharles O. “Chuck” Prince, ousted 15 months ago as Citigroup Inc.’s chief executive officer? Just call his extension at the bank, which still pays for his office and secretary in Midtown Manhattan.

Former Citigroup investment-banking head Michael Klein also has a free office and secretary after receiving a $34.3 million exit package when he quit in July 2008. John Reed, 70, who hasn’t worked at the bank since he resigned as co-CEO in 2000 with a $5 million parting bonus, is entitled to an office and secretary for as long as he wants.

Sanford I. “Sandy” Weill, who retired as chairman in 2006, is ending a 10-year consulting contract with the bank in April after just three years. The agreement gave him millions of dollars in perks, including an office, car and driver and use of company aircraft, which he gave up in February.

Nope didn't think so, anything else?

Citigroup Inc., the U.S. bank that got a $52 billion government bailout, said director Roberto Hernandez Ramirez will keep getting reimbursed for his use of private aircraft after he steps down from the board in April.

Hernandez, 66, will keep the perk because he remains non- executive chairman of Citigroup subsidiary Banco Nacional de Mexico, Mike Hanretta, a spokesman for the New York-based bank, said in an interview. His benefits also include an office and secretary and personal security and cost $2.61 million in 2007, according to a March 2008 regulatory filing.

His duties at the Mexico City-based unit, known as Banamex, include “governmental and client relations and strategic development,” the filing said. Hernandez kept his non-executive role after stepping down from full-time management in 2001, when Citigroup bought Banamex’s parent company for $12.5 billion.

Banamex by the way was exposed as a major drug money laundering bank when Citi bought it, and Hernandez owns the island onto which the dope was transferred on its way north. Despite the overt openness of Hernandez's drug ops, he filed three law suits against the reporter who broke the silence, and lost all three:

A long litigation by Roberto Hernández Ramírez and Banamex on the theme of narco-trafficking has arrived in the United States Courts: the banker has sued journalists Mario Renato Menéndez Rodríguez, editor of the daily Por Esto of the Yucatán Peninsula, and Al Giordano, editor of the Internet publication www.narconews.com, in the New York Supreme Court.The issue is over reports published in Por Esto in 1996 about the utilization of beaches on an island owned by the banker Hernández - one of the beneficiaries of the bank privatization of Carlos Salinas and supporter of Vicente Fox - on a the coast of Quintana Roo as a receiving port for cocaine. The daily newspaper published not only the information but also illustrated it with photographs of drug containers from the beaches of this island.

Pictures and all, and Citi bought Banamex in 2001 in spite (or because?) of the drug connections and associated laundering ops. From Fromthewilderness:

On May 17 Citigroup, America's largest financial institution commanding some $700 billion in assets announced a $12.5 billion purchase of Banamex's parent company controlling some $39 billion in assets. The move will place Citigroup in control of one of the major - and proven - money laundering institutions in Mexico and allow Citigroup (first time for a US company) to penetrate the Mexican stock market.

That unit alone brought the bank untold billions if not trillions of dollars of cash flow (is this what UN Office of Drugs and Crime Director Antonio Maria Costa was referring to when he said "drug money is keeping banks propped up" in Jan.?) , yet so deeply insolvent was Citigroup that here it teeters on implosion anyway. So, with cost-cutting and maybe even drug money laundering to no avail, Citi sold some more junk of its own (bonds this time) in January, but credit default risk rested squarely on the working citi-zen's back:

Citigroup Inc. sold $12 billion of notes guaranteed by the Federal Deposit Insurance Corp. ... The sale is the biggest offering of debt backed by the FDIC since banks began using the government’s Temporary Liquidity Guarantee Program on Nov. 25

Can anyone say black hole? Yep Mish can!

Citigroup is a black hole, sucking in every dollar thrown at it and it still wants more. No amount seems enough to save it. Taxpayers have already guaranteed a whopping $300 billion dollars worth of Citigroup debt. Now, two months later, Citigroup is begging for still more capital, pretending that will save it.

How the hell can you preserve a system this way? The answer is you can't.

But they keep trying! Even as Citi cozied up to the government, the Treasury Secretary strains beyond reason. Timothy Terrific, cracking voice and all, rushes to triage each pimple on every billionaire's butt. Same movie, different cast.

Can anyone tell it like it is?

Yep, Mish again!

Not only is Citigroup a black hole from which no taxpayer dollars can escape, but Geithner's brain is a black hole from which no intelligent thought can escape.

Geithner is attempting to bail out his banking buddies, no more, no less, and he does not give a damn what it costs taxpayers to do so. And while everyone and their brother has hopped on the Nationalization Train (please see The Nationalization Train Has Left The Station), I think there are at a bare minimum a half dozen questions that need to be addressed first (please see Nationalization Revisited).

Citigroup is struggling to remain independent even as it knows full well, that without still more government intervention, it is worthless. In fact, Citigroup is less than worthless because without more taxpayer cash infusions it cannot survive.

To hell with Citigroup. Bust it up and sell it. It's the best possible outcome for everyone involved.

Citi is busting itself up for sure, but the rubble remains poised to fall as always on the citi-zinry:

The Obama administration says it has no plan to nationalize banks outright, and government officials say they want to avoid taking a big stake in Citigroup. The hope is that more equity capital from the government, supplied through the conversion of preferred stock, will help Citigroup pass a new “stress test” that federal regulators are preparing to administer to 20 or so large banks. The administration’s strategy seems to point in the direction of stopping short of outright nationalization — where the government takes control — and stepping up regulatory scrutiny.

That sounds benign enough after the $400 billion doled out to this point, a simple conversion, from common to preferred shares, but there in that simple conversion lingers the implosion of Citigroup:

According to the reports, the government could convert a large portion of its preferred shares into common stock, a move that would give taxpayers as much as a 40% stake in the bank.

So those government officials who want to avoid taking a big stake in Citigroup don't think 40% is a big stake -- but the weight of trillions doesn't hang over their heads, it hangs over the taxpayers', and blocks out the sun. And as the light dims for Joe and Jane Doe, team Obama huddles to discuss the most important question: what kinda plane will Pandit get? After all, as the man who piloted his Citi-bought hedge funds to failure, he has credentials every bit as good as Rubin, Hernández, or Prince.