How convenient - he and Paulsen can switch jobs if a Dem is elected president and hardly break stride at either institution... after all wasn't Paulsen sort of the interim Treasury Sec'ty? Not intensionally but in fact?
from the NYtimes article
" stock over eight years to serve as the banks elder statesman,...
His other role has been to serve as Mr. Princes sounding board and biggest supporter and to help broadly shape
the banks strategy.
"
I bloody hope Wall Street asks the questions I ask and doesn't feel assured by his appt - should it come to pass.
Yeah, I'm short C and under a leeeeetle anguish to cover on Monday, rather than ride it out and accept losing some of the gains of several weeks for several weeks before people see thru this - but the freakin' market is irrational - that's for sure. On the bright side maybe they'll announce the reasons for the change - like 5B in writedowns ?
But seriously, Rubin is the only really credible insider-stopgap. The others are too young (Michael Klein), or not yet well-enough known by the Board (Pandit). Again, like Merrill, I think these guys have to go outside and that will take weeks or months. I mean Bob Druskin is a nice guy but come on...
Thane is going to be offered a huge deal by at least one, and probably both of these companies. Thinking outside the box, I still wonder about the JP Morgan idea or maybe somebody like John Winklried of Goldman (doubt he'd be interested).
Good. I hope that he is just the advance of the Clinton transition team.
indeed theres nothing more important now than a Citigroup bailout. Robert Rubin simply cant go bankrupt. even if USD should be 1:1 to Zimbabwe dollar
i got some historic data and USD has fallen in value during past 7 years 56,4% compared to my currency SKK. well thats also a way to stick it to the taxpayers through currency depreciation.
what are the odds hilary will raise taxes and cut spending?
IMV every dollar of the 2001-2003 tax cuts went right into everyone's monthly mortgage payment [ie. the extra buying power just resulted in bidded-up land valuations] .
just exactly what i dont need
yeah, I know. . . much like broccoli and salad greens, nobody wants tax increases on the menu. Too bad we don't live in that candy land where people can eat ice cream 24/7 & gov't can spend $3T per year and not put any tax burdens on anyone.
I like Rangel's sock-the-rentiers tax package, however . . . anyone making over $150K is a rentier in some shape or form, and it's high time the back-end of the ye olde Greenspan Compromise starts spinning up and paying down some of this accumulated debt.
My wife and I combined make over that figure - are we rentier class?
If so, I'd like to know when I can start lighting my cigars with $20 bills because I sure don't see the money rolling in. At least after I pay all the costs, taxes, insurances I get lumped with before I even get to discretionary spending.
Rubin is just another shade of lipstick on the same pig.
Rubin was fully knowledgeable of the Prince dance, and as advisor, is responsible for Prince knowing the tune.
Flush it already and let's get on with seeing what can be salvaged, merged, split off, etc.
The loss of all or almost all the major US bank equities is obvious. The US is now a large, but weak player in the world credit markets. And the roll-on impact on many foreign banks will be the same as they hold the toxic garbage sold by Prince & Rubin.
Get the white paint, boys(& Tanta); it's time for a paint job.
Rubin thinks there is something beneficial in making people confident about the future, apparently because he thinks this creates a virtual circle. But over-confidence - minimizing the risks that the future holds - is as bad as under-confidence - over-estimating the risks. And every virutal circle is simply followed by a vicious circle (or vice versa).
Maybe no rentier class, but certainly within your reach. If you assume a lifestyle one or two notches above the absolute poverty line ($20,650 average all states combined for a familly of four in the 2005).
troy-
i dont really care about the taxes, what i care about it is the cutting spending part.
i know its selfish and it probably is short sighted, but i feed off the spending of the drunken fat pig rooting around in its own poo
i was hoping for tax and spend at the very worst
i'm as liberal socially as they come but it amazes me every year how much more conservative i become (i.e. selfish). damn the budget, spend money in my area and keep the party going - PLEASE!
It's a sign of how tragically successful the right wing propaganda machine has been in the US that such an attitude is called "conservative" these days.
If anyone on Citi's board thinks this is going to stabilize the situation, I think the markets are going to prove them near-certifiably insane.
By what magical leap of logic is this an improvement? Either Rubin was totally unaware of the SIV-charade, in which case he's incompetent and the tens of millions paid to him completely wasted, or else he was Prince's behind-the-scenes dance partner and is as guilty as Prince of, well, whatever it is that Prince is guilty of that justifies his resignation.
I'd expect Citi stock to crater, again, on Monday, but I've been wrong about most things of late, too.
What do you think this means for MLEC? I've been surprised all along at peoples' suspicion/surprise at this thing, and now the "shocked" reaction to the 10% treatment. These assets were all off the books in the SIV's - with little or no capital requirement. That was the point of the dam things. The MLEC is a mechanism to keep at least a percentage (the good stuff, theoretically) off the books. If it isn't good stuff it can't be priced. Now the MLEC may be too little too late, but the game of hide-the-baloney that's worked over the last two months (central banks lend to commercial banks who lend to investment banks who lend to hedge funds who buy assets from the Merrill's, Citi's, SIV's etc. so they don't have to get marked down) is breaking down.
Somewhat OT: does anyone feel that the breakdown of MBI, RDN, MTG, ACAC is going to put big pressure on the system, or will that be "contained"?
Profound implications if Radian or MGIC go down (PMI is considered the strongest financially of the 3).
Think about it. The mortgage insurers effectively own all of Freddie & Fannie's insurance risk above 80 LTV. If a mortgage insurer fails & borrower defaults continue on their present path, FRE & FNM's 3.25% capital base looks a lot smaller.
We might get to a 30% required downpayment on mortgages faster than you think.
My wife and I combined make over that figure - are we rentier class?
Not @ $150K for two; "rentier class" would be $300K for two. I'm borderline rentier, only due to the fact that not enough undergrads think computer programming is a worthwhile career, plus I live in the Bay Area where it takes $300K household income to comfortable afford a tear-down in the good parts of town.
Rentier income comes from pocketing economic rents. These include scarcity rents like what medical professionals can command, windfall profits from resource extraction and patent-protected technologies, and of course doing the parasitical landlord thing by living off the labor of others.
Maybe no rentier class, but certainly within your reach. If you assume a lifestyle one or two notches above the absolute poverty line ($20,650 average all states combined for a familly of four in the 2005).
Yeah, that would be nice. Unfortunately, in the real world, 2 notches above poverty level equals living in massive credit card debt and probably teaser mortgage rates about to reset. This isn't a widespread occurence for no reason.
....Now Teflon Bob (Rubin)appears on the verge of demonstrating that his immunity to criticism makes Ronald Reagan look like he was coated with bubble gum.
When he stepped down from his Treasury post this past summer, Rubin left
unfinished a legislative effort to re-write the nation's banking laws.
Misnamed "financial modernization" legislation was really a deregulatory
initiative......
The centerpiece of the deregulatory bill, which different fragments of the
finance industry have pushed for a decade and a half, is the repeal of the revered Glass-Steagall Act, which bars the common ownership of banks on
the one hand, and insurance companies and securities firms on the other....
Another failure (to pass the legislation), however, was not acceptable to one company above all --
Citigroup. The product of the merger between Citibank and Travelers,
Citigroup is operating in apparent violation of the bar on common
ownership of banking, and insurance and securities, thanks to a loophole
that provides for a two-year transition period.
Enter Robert Rubin. According to a report in the New York Times, Rubin
helped broker the final compromise language on financial deregulation.
And while he was brokering a deal between Congress and the White House, he was also, according to the New York Times account, negotiating his own
deal with Citigroup. A few days after the banking deal was finalized,
Citigroup announced it was hiring Rubin as a de facto co-chair of the
corporation.....
The bill will:
Pave the way for a new round of record-shattering financial industry
mergers, dangerously concentrating political and economic power;
Create too-big-to-fail institutions that are someday likely to drain the
public treasury as taxpayers bail out imperiled financial giants to
protect the stability of the nation's banking system;
Leave financial regulatory authority spread among a half dozen federal
and 50 state agencies, all uncoordinated, that will be overmatched by the
soon-to-be financial goliaths;
Facilitate the rip-off of mutual fund insurance policy holders by
permitting mutual insurance funds to switch domicile states -- thereby
enabling them to locate in states where they can convert to for-profit,
stockholder companies without properly reimbursing mutual policyholders (a
conversion of tens of billions of dollars);
Aggressively intrude on consumer privacy (and promote a still-greater
intensification of direct marketing), thanks to provisions permitting the
new financial giants to share finance, health, consumer and other personal
information among affiliates; and
Allow banks to continue to deny services to the poor (Congress rejected an amendment requiring banks to provide "lifeline accounts" to the poor,so they would have refuge from check-cashing operations and the
underground economy).
....Robert Rubin helped deliver this ticking time bomb of a bill to Wall
Street, first while in Treasury and then while in negotiations to land a
top spot at the finance industry's largest and highest-profile company. He
may well escape unscathed yet again, but it is sure to blow up on the rest
of us.
(end quote)
10 years, almost to the day!!!!!
Glad to see none of those consequences happened.
(Sorry about the crappy formatting, I'm not sure why it came through like that)
Thank you Neal,goes to show that RR is a true Clinton Democrat...If hillary gets in it will have been quite a while with either a Bush or Clinton as Fearless Leader.How old is Jenna now?
You can forget about a financial solution to Citigroup's problems if they put Rubin the Elder in charge. Any 'solution' he comes up with will be a political one and the financial problem will be swept under the conference table.
Rubin will smile his becoming smile and Congress will swoon.
dryfly- "How convenient - he [Rubin the Elder-mp] and Paulsen can switch jobs if a Dem is elected president and hardly break stride at either institution..."
If Obama is elected, then Rubin the Younger gets Treasury. You heard it here first.
They've got all the Democratic Party bases covered.
For anyone else admiring the "beauty" of the Bush-Clinton-Bush-Clinton seesaw, the obvious next choice would be Jeb Bush. THEN it would be Chelsea's turn to follow.
And btw, Chelsea eschewed the tedium of law school to go work for Avenue Capital Group, a hedge fund. Certainly the complaint the world is too crowded with lawyers will soon be replaced by there being too many parasitic hedge fund managers. That's the future, folks. In any case, Mitt Romney, alum of Bain Capital, is today setting the precedent for the young Ms. Clinton's future presidential turn.
New CEO coming in will have to do a Sar-Box signoff. Anybody here think you could figure out what assets are real and what aren't at Citi? Merrill has the same problem.
RE Bear,
If the SC is not fully implemented, Citi will likely have to continue to write-down on their own books as the terms and conditions of the SC will probably be highly contested between the banks.
Yes, there will be two types of losses, before and after. That is not to say the "before" cannot continue to evolve to finally reflect reality long after the SC is established. That again depends on the terms of the SC.
IMO, the SC will have to work similar to workers' comp insurance. The expense will be a premium on the insurance. Those premiums will swing wildly as some players have to pay according to the recent past performance. What concerns me is that none of these banks would think of forming something like this unless both:
1. Their existence is in danger.
2. They did not believe there is a significant possibility of financial support from the Treasury.
More generally, I'll leave you with some key phrasiology that is used in these matters.
"Knew, or should have known with the best information at the time" - prove that as an agrieved party, and you have a nice lawsuit on your hands, restatements, retractions of executive bonuses, la guillotine.
Those interested in this topic should read Dean Baker's comment of today in Beat the Press.
Sorry, I'm digitally challenged and can't link to it, but you can find it at The Center for Economic and Policy Research - CEPR
In this respect, it would have also been appropriate to note Mr. Rubin's involvement with Enron. As the NYT previously reported, when the collapse of Enron was imminent, Mr. Rubin phoned a former associate at the Treasury Department to see if he would ask the credit rating agencies to delay downgrading Enron's debt. Citigroup held hundreds of millions of dollars of Enron's debt at the time.
Citi cannot be allowed to fail. All the other banks are in the same spot. It would create a confidence problem and just might spook the herd. However, at some point they may all go down together. Prepare accordingly.
If I had to pick one Clinton-era official who is not to be trusted, it's Bob Rubin. It's easy to forget, given the excesses of the Bush administration, how naked in bed the Clinton admin was with Wall Street.
Troy, amen to that. All of the Bush tax cuts, except the cut on the first $10,000 of earnings, need to be repealed. And then, to claw back some of the billions looted from the treasury these past 5-6 years, implement Rangel's plans for taxes on hedge funds and especially carried interest. Eliminate all of the off-shore tax shelters. And, after ratcheting up the exemption a bit, jack up the estate tax. It's the fairest tax we have, yet millions of people have been fooled into serving the interests of the billionaires.
Anarchus is right, Rubin is as guilty, if not moreso, than Weill and Prince.
The Rubin Revolution is misery. If there is an AntiChrist, I vote that it is Bob Rubin.
If there is any true Karma, the man who enabled the creation of the worst monster in history, Citi, should be in charge while the whole lie is exposed. But battling this evil creature is not easy. And Hilliary is bought and paid by this scumbag, so she'll work to bail it out, rather than expose and purge this giant mistake.
hat are the odds hilary will raise taxes and cut spending?
No spending cuts as the tax increases will just be used to enlarge entitlement spending. Working in an environment of currency devaluation and rising taxes to support the welfare state just won't be worth it for those that have the means.
There has appeared a path to the implosion of the Derivatives market, whuch in the most recent report of the OCC as of Q2 of 2007, was shown to have increased to more than $160 Trillion notional from less than $152 Trillion in the prior quarter for the top 25 US Holding Companies alone.
These derivative contracts represent a stream of cash flows usually over a period of years, and are dependent for their valuations on the same sort of credit rating apparatus that has been called into question in the instance first of subprime mortgage securities, then of asset backed commercial paper, next of CDO's and other structured credit products. There is good reason to suspect that the creditworthiness of many counterparties to these transactions has been artificially raised in a way that will not withstand the actual sort of unfolding financial stress , which could be characterized simply as financial reality.
Because of the size of this market and the degree of leverage at all levels of business and government, predicated on uncertain future revenues, even revaluations much more modest than witnessed in the traded debt markets in recent months may result in major losses of capital and real questions of solvency. And that is before the untested consequence of chain reaction default is even addressed in this over the counter market.
The accounting question must also be taken into consideration. In basic accounting theory, the changes in assets and liabilities net to zero. However, as I understand it, for counterparties to the same derivative contract, there is no certainty that the treatment of that derivatve on their respective balance sheets nets to zero or is even consistent. Indeed it may be unlikely that it nets to zero, and even less likely that its net is negative. In other words, under present accounting, imaginary capital may be created on the global consolidated account by these derivative contracts. As time passes and cash flows prove inconsistent with these assumptions, there is the possibility to add more derivatives and push a day of reckoning into the future. This could in theory account for at least a part of the explosive growth in this market. Dr. Ponzi, call your office.
Gary,
It's not that simple sir. I guess you don't like rich kids getting a free ride off dad's wealth. Fair enough.
However, we have a federal estate tax scheme that changes immensely each year. If a billionaire passes away in 2010. Per the current law, there will be no federal estate tax. Other years, there will be varying levels. In addition, there are 50 states. As with Congress, these are run by people with little or no finance background. All 50 states have their own estate tax laws.
There are good fiscal and economic arguements for estate taxes, jealousy is not amoung them.
re: Clark - very well said. If when nets out, for the system as a whole it doesn't matter - for example, in equities, I'm short - somebody else is long, as we mark to market on an up day, I lose, he/she wins, net net systemwide its a zero sum game. But when I default and the transaction is not exchange-mediated ( we are counterparties to each other and not to the exchange which is community based and community carried default risk ) money really does go to Money Heaven and systemwide there's a loss of money and TROUBLE.
And most of the derivative transactions have been OTC, not exchange-traded and the system is in trouble. You have it right, IMO.
No kidding, lama. I know plenty about estate taxes, having studied it in law school and studying up on NY law due to a modest inheritance on my wife's side, still winding its way through the courts.
I'm not sure why you ascribe my argument to jealousy; it's a matter of public policy. I was raised on the notion of equality of opportunity. I now know that to be a mirage; nevertheless, with appropriiate tax policy we can prevent the development of a permanent overclass. The policies of the GOP amount to establishing a permanent aristocracy here in the United States; all that is missing is inherited titles of lordship, etc.
Eliminate estate tax and eliminate or minimize taxes on investment income and presto: Unlimited passing of wealth to future generations and an entire class of people who pay minimal taxes. I am not interested in living in a feudal society.
One more element to the plan: continually screaming about a phony crisi in Social Security; there is none. The "bailout" of 1982 engineered by Greenspan had one purpose; to shift the tax burden (via FICA tax increase and subsequent Reagan marginal income tax cuts) from the wealthy to the working class.
The GOP tried (and failed) to do it again last year. And they will keep on trying, because there is a lot of money at stake.
Rentier income comes from pocketing economic rents. These include
scarcity rents like what medical professionals can command, windfall
profits from resource extraction and patent-protected technologies, and of course doing the parasitical landlord thing by living off the labor of others.
One of the best parts of SICKO, seeing the European doctors making a not obscene but still very healthy income like the educated craftpeople they should be.
I agee that the GOP plan to eliminate all inheritance taxes is a bad plan. My preference would be to have a 10 million $ exemption. That should take care of most of the family farms and other "small businesses." At least Buffett and Gates are against eliminating the inheritance tax.
My appologies Gary. Ya know, I've heard many arguements against the estate tax. When I cut through it, I found in every case I had someone who were pissed off they didn't have it as good. Since that's obviously not your case, I'll retract my hasty conclusion.
I have one problem with the inheritance of vast sums that tend to concentrate wealth, extract that wealth from the entreprenuerial economy and ruin the lives of the grandchildren (witness the Kennedys).
Working in an environment of currency devaluation and rising taxes to support the welfare state just won't be worth it for those that have the means.
Here, yout argument has been tripped up by your own language. By definition, those receiving economic rents aren't "working", other than working the system in rent-seeking behaviors.
For a good example of that, please refer to the 2003-2006 housing explosion. This was a colossal misallocation of rent-seeking capital that would make the North Korean Politburo blush in envy!
IMV, if you're not working for the love of the job and what you contribute to society feel free to leave . . . America was built by the laborers, not the rentiers, and the tax code changes we need to get back to sustainable governance is far, far from confiscatory Laffer terroritory.
But if you disagree, feel free to take your "wealth" with you; I hear the fake private islands off the coast of Dubai are nice.
The true richness of this country is in the productive land, the inquisitive people, our liberal laws, and our abilities to get along together as a nation of immigrants, not the numbers in our bank accounts, which at any rate have been trending south for the bulk of the population, in my lifetime at least.
Original Banker , I agree MLEC is DOA. If not , no emergency meeting by C today and there wouldn't be the subsequent disclosure of 5.9 billion more in writedowns.... the ABX decline which commenced in early October , coupled with Fitch / Moody's /S&P RMBS and CDOs downgrades have made the bailout plan moot. The SIV assets will have to come back on the books and marked to market between now and probably the first reporting period in 08. When they truly have to mark to market , we'll see who has been swimming without trunks !
Quiet now. I wonder what Citi's meeting will bring.
Lama, accepted. My example would be Richard Mellon Scaife . . . but inheriting a huge fortune you did nothing to earn is not necessarily good for a person's character.
The true richness of this country is in the productive land, the inquisitive people, our liberal laws, and our abilities to get along together as a nation of immigrants, not the numbers in our bank accounts, which at any rate have been trending south for the bulk of the population, in my lifetime at least.
So in you opinion higher taxes and devaluing the currency is going to fix all that. Good luck and work hard as I don't don't think I will join you on that.
But if you disagree, feel free to take your "wealth" with you
I would love to leave but I think the IRS would get most of my wealth if I tried. Better to just sit here on my ass and watch in amusment as the debt slaves toil and search for the impending tax shelters that our liberal laws will provide.
BREAKING NEWS:
Charles Prince has resigned as Citi chairman and CEO. Robert Rubin to be named chairman. Sir Win Bischoff will be interim CEO. Citi to take $8 billion to $11 billion in additional writedowns.
First to troll (again).
How convenient - he and Paulsen can switch jobs if a Dem is elected president and hardly break stride at either institution... after all wasn't Paulsen sort of the interim Treasury Sec'ty? Not intensionally but in fact?
The revolving door is spinning faster and faster.
Good. I hope that he is just the advance of the Clinton transition team.
speaking of the forthcoming clinton administration...
what are the odds hilary will raise taxes and cut spending? just exactly what i dont need
from the NYtimes article
" stock over eight years to serve as the banks elder statesman,...
His other role has been to serve as Mr. Princes sounding board and biggest supporter and to help broadly shape
the banks strategy.
"
I bloody hope Wall Street asks the questions I ask and doesn't feel assured by his appt - should it come to pass.
Yeah, I'm short C and under a leeeeetle anguish to cover on Monday, rather than ride it out and accept losing some of the gains of several weeks for several weeks before people see thru this - but the freakin' market is irrational - that's for sure. On the bright side maybe they'll announce the reasons for the change - like 5B in writedowns ?
-K
Um, I don't get it.
Isn't Rubin a large part of the problem?
This makes me think the Board is red-handed too.
Do I get a hat tip for calling this?
NOOOOOOOOOOOOOOOOOOOOOOOOOO
But seriously, Rubin is the only really credible insider-stopgap. The others are too young (Michael Klein), or not yet well-enough known by the Board (Pandit). Again, like Merrill, I think these guys have to go outside and that will take weeks or months. I mean Bob Druskin is a nice guy but come on...
Thane is going to be offered a huge deal by at least one, and probably both of these companies. Thinking outside the box, I still wonder about the JP Morgan idea or maybe somebody like John Winklried of Goldman (doubt he'd be interested).
2007 CR Winner of the best Citi headline one that Tanta would be bloody proud of:
PRINCE HAS BEEN CHUCKED OFF THE DANCE FLOOR
http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2007/11/04/ccom104.xml
Good. I hope that he is just the advance of the Clinton transition team.
indeed theres nothing more important now than a Citigroup bailout. Robert Rubin simply cant go bankrupt. even if USD should be 1:1 to Zimbabwe dollar
i got some historic data and USD has fallen in value during past 7 years 56,4% compared to my currency SKK. well thats also a way to stick it to the taxpayers through currency depreciation.
Why don't we just nationalize Citibank? It seems we have to bail it out every 15 years or so.
what are the odds hilary will raise taxes and cut spending?
IMV every dollar of the 2001-2003 tax cuts went right into everyone's monthly mortgage payment [ie. the extra buying power just resulted in bidded-up land valuations] .
just exactly what i dont need
yeah, I know. . . much like broccoli and salad greens, nobody wants tax increases on the menu. Too bad we don't live in that candy land where people can eat ice cream 24/7 & gov't can spend $3T per year and not put any tax burdens on anyone.
I like Rangel's sock-the-rentiers tax package, however . . . anyone making over $150K is a rentier in some shape or form, and it's high time the back-end of the ye olde Greenspan Compromise starts spinning up and paying down some of this accumulated debt.
Troy
My wife and I combined make over that figure - are we rentier class?
If so, I'd like to know when I can start lighting my cigars with $20 bills because I sure don't see the money rolling in. At least after I pay all the costs, taxes, insurances I get lumped with before I even get to discretionary spending.
MadJock: I believe the $20 bills are dispensed at something called "ATMs". Hope that helps.
Robert Rubin, come on down!
You are the next contestant on The Mark Is Right!
Rubin is just another shade of lipstick on the same pig.
Rubin was fully knowledgeable of the Prince dance, and as advisor, is responsible for Prince knowing the tune.
Flush it already and let's get on with seeing what can be salvaged, merged, split off, etc.
The loss of all or almost all the major US bank equities is obvious. The US is now a large, but weak player in the world credit markets. And the roll-on impact on many foreign banks will be the same as they hold the toxic garbage sold by Prince & Rubin.
Get the white paint, boys(& Tanta); it's time for a paint job.
Rubin thinks there is something beneficial in making people confident about the future, apparently because he thinks this creates a virtual circle. But over-confidence - minimizing the risks that the future holds - is as bad as under-confidence - over-estimating the risks. And every virutal circle is simply followed by a vicious circle (or vice versa).
It really doesn't matter who takes over at Citi.
What matters is whether or not the new CEO does a 'due diligence'.
@MadJock
Maybe no rentier class, but certainly within your reach. If you assume a lifestyle one or two notches above the absolute poverty line ($20,650 average all states combined for a familly of four in the 2005).
troy-
i dont really care about the taxes, what i care about it is the cutting spending part.
i know its selfish and it probably is short sighted, but i feed off the spending of the drunken fat pig rooting around in its own poo
i was hoping for tax and spend at the very worst
i'm as liberal socially as they come but it amazes me every year how much more conservative i become (i.e. selfish). damn the budget, spend money in my area and keep the party going - PLEASE!
It's a sign of how tragically successful the right wing propaganda machine has been in the US that such an attitude is called "conservative" these days.
If anyone on Citi's board thinks this is going to stabilize the situation, I think the markets are going to prove them near-certifiably insane.
By what magical leap of logic is this an improvement? Either Rubin was totally unaware of the SIV-charade, in which case he's incompetent and the tens of millions paid to him completely wasted, or else he was Prince's behind-the-scenes dance partner and is as guilty as Prince of, well, whatever it is that Prince is guilty of that justifies his resignation.
I'd expect Citi stock to crater, again, on Monday, but I've been wrong about most things of late, too.
What do you think this means for MLEC? I've been surprised all along at peoples' suspicion/surprise at this thing, and now the "shocked" reaction to the 10% treatment. These assets were all off the books in the SIV's - with little or no capital requirement. That was the point of the dam things. The MLEC is a mechanism to keep at least a percentage (the good stuff, theoretically) off the books. If it isn't good stuff it can't be priced. Now the MLEC may be too little too late, but the game of hide-the-baloney that's worked over the last two months (central banks lend to commercial banks who lend to investment banks who lend to hedge funds who buy assets from the Merrill's, Citi's, SIV's etc. so they don't have to get marked down) is breaking down.
Somewhat OT: does anyone feel that the breakdown of MBI, RDN, MTG, ACAC is going to put big pressure on the system, or will that be "contained"?
mbartv,
Profound implications if Radian or MGIC go down (PMI is considered the strongest financially of the 3).
Think about it. The mortgage insurers effectively own all of Freddie & Fannie's insurance risk above 80 LTV. If a mortgage insurer fails & borrower defaults continue on their present path, FRE & FNM's 3.25% capital base looks a lot smaller.
We might get to a 30% required downpayment on mortgages faster than you think.
Banker/Others,
If super conduit is a done deal, then why is Citi and others still witting down losses?
Are we talking about two different losses here (one covered by Super-C and other is not)?
Thanks in advance.
My wife and I combined make over that figure - are we rentier class?
Not @ $150K for two; "rentier class" would be $300K for two. I'm borderline rentier, only due to the fact that not enough undergrads think computer programming is a worthwhile career, plus I live in the Bay Area where it takes $300K household income to comfortable afford a tear-down in the good parts of town.
Rentier income comes from pocketing economic rents. These include scarcity rents like what medical professionals can command, windfall profits from resource extraction and patent-protected technologies, and of course doing the parasitical landlord thing by living off the labor of others.
Maybe no rentier class, but certainly within your reach. If you assume a lifestyle one or two notches above the absolute poverty line ($20,650 average all states combined for a familly of four in the 2005).
Yeah, that would be nice. Unfortunately, in the real world, 2 notches above poverty level equals living in massive credit card debt and probably teaser mortgage rates about to reset. This isn't a widespread occurence for no reason.
Nov 6, 1999
Teflon Bob and Banking Deregulation
....Now Teflon Bob (Rubin)appears on the verge of demonstrating that his immunity to criticism makes Ronald Reagan look like he was coated with bubble gum.
When he stepped down from his Treasury post this past summer, Rubin left
unfinished a legislative effort to re-write the nation's banking laws.
Misnamed "financial modernization" legislation was really a deregulatory
initiative......
The centerpiece of the deregulatory bill, which different fragments of the
finance industry have pushed for a decade and a half, is the repeal of the revered Glass-Steagall Act, which bars the common ownership of banks on
the one hand, and insurance companies and securities firms on the other....
Another failure (to pass the legislation), however, was not acceptable to one company above all --
Citigroup. The product of the merger between Citibank and Travelers,
Citigroup is operating in apparent violation of the bar on common
ownership of banking, and insurance and securities, thanks to a loophole
that provides for a two-year transition period.
Enter Robert Rubin. According to a report in the New York Times, Rubin
helped broker the final compromise language on financial deregulation.
And while he was brokering a deal between Congress and the White House, he was also, according to the New York Times account, negotiating his own
deal with Citigroup. A few days after the banking deal was finalized,
Citigroup announced it was hiring Rubin as a de facto co-chair of the
corporation.....
The bill will:
mergers, dangerously concentrating political and economic power;
public treasury as taxpayers bail out imperiled financial giants to
protect the stability of the nation's banking system;
and 50 state agencies, all uncoordinated, that will be overmatched by the
soon-to-be financial goliaths;
permitting mutual insurance funds to switch domicile states -- thereby
enabling them to locate in states where they can convert to for-profit,
stockholder companies without properly reimbursing mutual policyholders (a
conversion of tens of billions of dollars);
intensification of direct marketing), thanks to provisions permitting the
new financial giants to share finance, health, consumer and other personal
information among affiliates; and
underground economy).
Robert Rubin helped deliv
(continued)
....Robert Rubin helped deliver this ticking time bomb of a bill to Wall
Street, first while in Treasury and then while in negotiations to land a
top spot at the finance industry's largest and highest-profile company. He
may well escape unscathed yet again, but it is sure to blow up on the rest
of us.
(end quote)
10 years, almost to the day!!!!!
Glad to see none of those consequences happened.
(Sorry about the crappy formatting, I'm not sure why it came through like that)
Whoops, 8 years later.
Citi is Enron-redux.
They have SIV's off the books that are going to have to be brought on the books, and no one knows if the books can take it.
Appointing Rubin, who doesn't want the job, is a panic move to prevent the bank from going under.
Citi is getting bailed out.
Oh, and did the insiders know all about this months ago?
Well, recall that Rubin is the Clintons' best friend and that the Clintons' left the market several months ago.
Alan Abelson's column in Barron's this week is excellent. The GDP numbers? Made up. Part of the GDP was a 0.8% inflation deflator. Right.
Thank you Neal,goes to show that RR is a true Clinton Democrat...If hillary gets in it will have been quite a while with either a Bush or Clinton as Fearless Leader.How old is Jenna now?
Bond Insurers-
The Next Worry: Bond Insurers
You can forget about a financial solution to Citigroup's problems if they put Rubin the Elder in charge. Any 'solution' he comes up with will be a political one and the financial problem will be swept under the conference table.
Rubin will smile his becoming smile and Congress will swoon.
Tom Stone
Chelsea is 27 or so. Jenna is 26 or so.
President has to be 35 or more.
Hmmmmmmm
Looks like Chelsea would be 35 at the end of 2 terms of Hillary.
dryfly- "How convenient - he [Rubin the Elder-mp] and Paulsen can switch jobs if a Dem is elected president and hardly break stride at either institution..."
If Obama is elected, then Rubin the Younger gets Treasury. You heard it here first.
They've got all the Democratic Party bases covered.
Interesting post Neal, thanks.
For anyone else admiring the "beauty" of the Bush-Clinton-Bush-Clinton seesaw, the obvious next choice would be Jeb Bush. THEN it would be Chelsea's turn to follow.
And btw, Chelsea eschewed the tedium of law school to go work for Avenue Capital Group, a hedge fund. Certainly the complaint the world is too crowded with lawyers will soon be replaced by there being too many parasitic hedge fund managers. That's the future, folks. In any case, Mitt Romney, alum of Bain Capital, is today setting the precedent for the young Ms. Clinton's future presidential turn.
Sheesh, it's so obvious.
Profiting from"dead labor" is evil. Social Security will take care of you in old age.
Conjure says we should just end the charade and change the names "Washington, DC" to "Elsinore" and "White House" to "Kronborg Castle."
Whether or not the problems were his....a change was necessary....
New CEO coming in will have to do a Sar-Box signoff. Anybody here think you could figure out what assets are real and what aren't at Citi? Merrill has the same problem.
RE Bear,
If the SC is not fully implemented, Citi will likely have to continue to write-down on their own books as the terms and conditions of the SC will probably be highly contested between the banks.
Yes, there will be two types of losses, before and after. That is not to say the "before" cannot continue to evolve to finally reflect reality long after the SC is established. That again depends on the terms of the SC.
IMO, the SC will have to work similar to workers' comp insurance. The expense will be a premium on the insurance. Those premiums will swing wildly as some players have to pay according to the recent past performance. What concerns me is that none of these banks would think of forming something like this unless both:
1. Their existence is in danger.
2. They did not believe there is a significant possibility of financial support from the Treasury.
More generally, I'll leave you with some key phrasiology that is used in these matters.
"Knew, or should have known with the best information at the time" - prove that as an agrieved party, and you have a nice lawsuit on your hands, restatements, retractions of executive bonuses, la guillotine.
M-LEC has got to be dead. The board wouldn't have called an 'emergency' meeting if M-LEC were still in play. That would have been too disruptive.
Those interested in this topic should read Dean Baker's comment of today in Beat the Press.
Sorry, I'm digitally challenged and can't link to it, but you can find it at The Center for Economic and Policy Research - CEPR
Ethan, I believe you are referring to the comments at:
Beat the Press Archive | The American Prospect
Notably:
In this respect, it would have also been appropriate to note Mr. Rubin's involvement with Enron. As the NYT previously reported, when the collapse of Enron was imminent, Mr. Rubin phoned a former associate at the Treasury Department to see if he would ask the credit rating agencies to delay downgrading Enron's debt. Citigroup held hundreds of millions of dollars of Enron's debt at the time.
Given Ruben's track record, it seems that he is eminently qualified to run C.
Citi cannot be allowed to fail. All the other banks are in the same spot. It would create a confidence problem and just might spook the herd. However, at some point they may all go down together. Prepare accordingly.
Bystander you beat me to it.
If I had to pick one Clinton-era official who is not to be trusted, it's Bob Rubin. It's easy to forget, given the excesses of the Bush administration, how naked in bed the Clinton admin was with Wall Street.
Troy, amen to that. All of the Bush tax cuts, except the cut on the first $10,000 of earnings, need to be repealed. And then, to claw back some of the billions looted from the treasury these past 5-6 years, implement Rangel's plans for taxes on hedge funds and especially carried interest. Eliminate all of the off-shore tax shelters. And, after ratcheting up the exemption a bit, jack up the estate tax. It's the fairest tax we have, yet millions of people have been fooled into serving the interests of the billionaires.
Anarchus is right, Rubin is as guilty, if not moreso, than Weill and Prince.
The Rubin Revolution is misery. If there is an AntiChrist, I vote that it is Bob Rubin.
If there is any true Karma, the man who enabled the creation of the worst monster in history, Citi, should be in charge while the whole lie is exposed. But battling this evil creature is not easy. And Hilliary is bought and paid by this scumbag, so she'll work to bail it out, rather than expose and purge this giant mistake.
Justice delayed.
hat are the odds hilary will raise taxes and cut spending?
No spending cuts as the tax increases will just be used to enlarge entitlement spending. Working in an environment of currency devaluation and rising taxes to support the welfare state just won't be worth it for those that have the means.
There has appeared a path to the implosion of the Derivatives market, whuch in the most recent report of the OCC as of Q2 of 2007, was shown to have increased to more than $160 Trillion notional from less than $152 Trillion in the prior quarter for the top 25 US Holding Companies alone.
These derivative contracts represent a stream of cash flows usually over a period of years, and are dependent for their valuations on the same sort of credit rating apparatus that has been called into question in the instance first of subprime mortgage securities, then of asset backed commercial paper, next of CDO's and other structured credit products. There is good reason to suspect that the creditworthiness of many counterparties to these transactions has been artificially raised in a way that will not withstand the actual sort of unfolding financial stress , which could be characterized simply as financial reality.
Because of the size of this market and the degree of leverage at all levels of business and government, predicated on uncertain future revenues, even revaluations much more modest than witnessed in the traded debt markets in recent months may result in major losses of capital and real questions of solvency. And that is before the untested consequence of chain reaction default is even addressed in this over the counter market.
The accounting question must also be taken into consideration. In basic accounting theory, the changes in assets and liabilities net to zero. However, as I understand it, for counterparties to the same derivative contract, there is no certainty that the treatment of that derivatve on their respective balance sheets nets to zero or is even consistent. Indeed it may be unlikely that it nets to zero, and even less likely that its net is negative. In other words, under present accounting, imaginary capital may be created on the global consolidated account by these derivative contracts. As time passes and cash flows prove inconsistent with these assumptions, there is the possibility to add more derivatives and push a day of reckoning into the future. This could in theory account for at least a part of the explosive growth in this market. Dr. Ponzi, call your office.
M-LEC has got to be dead. [...]
Jack Staub | 11.04.07 - 10:22 am
Heavens no, not dead, you're witnessing the birth pains. Shame the father won't be there to witness the wondrous moment...
(Or will he? Let us know if RR starts passing out cigars.)
Clark,
THAT is the big question!
And that is before the untested consequence of chain reaction default is even addressed in this over the counter market.
Good luck to all of us...
Remind me again who was where in 17 when the 2yr/$500,000 home exemption was enacted.
The fox is just in a different henhouse. President Romney and VP Rice would never put up with any of this.
Correction: "in 1997" not 17 (sticky key).
Rubin was there when the loophole was pushed through without considering the consequences.
A musical tribute
to the outgoing Prince formerly known as CEO. May not even need to change the lyrics, much.
~
Clark, so I assume you agree with Buffett's description of the derivatives markets as "financial instruments of mass destruction".
Chuck is now the toad formerly known as Prince.
Gary,
It's not that simple sir. I guess you don't like rich kids getting a free ride off dad's wealth. Fair enough.
However, we have a federal estate tax scheme that changes immensely each year. If a billionaire passes away in 2010. Per the current law, there will be no federal estate tax. Other years, there will be varying levels. In addition, there are 50 states. As with Congress, these are run by people with little or no finance background. All 50 states have their own estate tax laws.
There are good fiscal and economic arguements for estate taxes, jealousy is not amoung them.
re: Clark - very well said. If when nets out, for the system as a whole it doesn't matter - for example, in equities, I'm short - somebody else is long, as we mark to market on an up day, I lose, he/she wins, net net systemwide its a zero sum game. But when I default and the transaction is not exchange-mediated ( we are counterparties to each other and not to the exchange which is community based and community carried default risk ) money really does go to Money Heaven and systemwide there's a loss of money and TROUBLE.
And most of the derivative transactions have been OTC, not exchange-traded and the system is in trouble. You have it right, IMO.
-K
The Banker most recent comment wasn't me. I am old original banker.
RE BEAR,
I think MLEC is a done deal as in dead as a doornail. I've been saying so for several days now. Overtaken by events.
No kidding, lama. I know plenty about estate taxes, having studied it in law school and studying up on NY law due to a modest inheritance on my wife's side, still winding its way through the courts.
I'm not sure why you ascribe my argument to jealousy; it's a matter of public policy. I was raised on the notion of equality of opportunity. I now know that to be a mirage; nevertheless, with appropriiate tax policy we can prevent the development of a permanent overclass. The policies of the GOP amount to establishing a permanent aristocracy here in the United States; all that is missing is inherited titles of lordship, etc.
Eliminate estate tax and eliminate or minimize taxes on investment income and presto: Unlimited passing of wealth to future generations and an entire class of people who pay minimal taxes. I am not interested in living in a feudal society.
One more element to the plan: continually screaming about a phony crisi in Social Security; there is none. The "bailout" of 1982 engineered by Greenspan had one purpose; to shift the tax burden (via FICA tax increase and subsequent Reagan marginal income tax cuts) from the wealthy to the working class.
The GOP tried (and failed) to do it again last year. And they will keep on trying, because there is a lot of money at stake.
Rentier income comes from pocketing economic rents. These include
scarcity rents like what medical professionals can command, windfall
profits from resource extraction and patent-protected technologies, and
of course doing the parasitical landlord thing by living off the labor
of others.
One of the best parts of SICKO, seeing the European doctors making a not obscene but still very healthy income like the educated craftpeople they should be.
I agee that the GOP plan to eliminate all inheritance taxes is a bad plan. My preference would be to have a 10 million $ exemption. That should take care of most of the family farms and other "small businesses." At least Buffett and Gates are against eliminating the inheritance tax.
My appologies Gary. Ya know, I've heard many arguements against the estate tax. When I cut through it, I found in every case I had someone who were pissed off they didn't have it as good. Since that's obviously not your case, I'll retract my hasty conclusion.
I have one problem with the inheritance of vast sums that tend to concentrate wealth, extract that wealth from the entreprenuerial economy and ruin the lives of the grandchildren (witness the Kennedys).
Working in an environment of currency devaluation and rising taxes to support the welfare state just won't be worth it for those that have the means.
Here, yout argument has been tripped up by your own language. By definition, those receiving economic rents aren't "working", other than working the system in rent-seeking behaviors.
For a good example of that, please refer to the 2003-2006 housing explosion. This was a colossal misallocation of rent-seeking capital that would make the North Korean Politburo blush in envy!
IMV, if you're not working for the love of the job and what you contribute to society feel free to leave . . . America was built by the laborers, not the rentiers, and the tax code changes we need to get back to sustainable governance is far, far from confiscatory Laffer terroritory.
But if you disagree, feel free to take your "wealth" with you; I hear the fake private islands off the coast of Dubai are nice.
The true richness of this country is in the productive land, the inquisitive people, our liberal laws, and our abilities to get along together as a nation of immigrants, not the numbers in our bank accounts, which at any rate have been trending south for the bulk of the population, in my lifetime at least.
(btw as a quasi-Georgist I tend to believe we should tax the rent-seeking itself, not the capital or interest accrued thereto).
Original Banker , I agree MLEC is DOA. If not , no emergency meeting by C today and there wouldn't be the subsequent disclosure of 5.9 billion more in writedowns.... the ABX decline which commenced in early October , coupled with Fitch / Moody's /S&P RMBS and CDOs downgrades have made the bailout plan moot. The SIV assets will have to come back on the books and marked to market between now and probably the first reporting period in 08. When they truly have to mark to market , we'll see who has been swimming without trunks !
Quiet now. I wonder what Citi's meeting will bring.
Lama, accepted. My example would be Richard Mellon Scaife . . . but inheriting a huge fortune you did nothing to earn is not necessarily good for a person's character.
The true richness of this country is in the productive land, the inquisitive people, our liberal laws, and our abilities to get along together as a nation of immigrants, not the numbers in our bank accounts, which at any rate have been trending south for the bulk of the population, in my lifetime at least.
So in you opinion higher taxes and devaluing the currency is going to fix all that. Good luck and work hard as I don't don't think I will join you on that.
But if you disagree, feel free to take your "wealth" with you
I would love to leave but I think the IRS would get most of my wealth if I tried. Better to just sit here on my ass and watch in amusment as the debt slaves toil and search for the impending tax shelters that our liberal laws will provide.
o doubt Prince's demise and write downs of over $10 bln would be my prediction.
From the WSJ:
BREAKING NEWS:
Charles Prince has resigned as Citi chairman and CEO. Robert Rubin to be named chairman. Sir Win Bischoff will be interim CEO. Citi to take $8 billion to $11 billion in additional writedowns.
"Given Ruben's track record, it seems that he is eminently qualified to run C."
Ya, given that Kenneth Lay has retired.
8 to 11.
My, my.
yah, what wally said.
-K