Commentaries

Now raising intellectual capital

Bair, a regulator for the people

-

 In Sheila we trust.

Maybe that should be the new mantra for U.S. taxpayers — especially ones who don’t feel the nation’s bankers have shown sufficient gratitude for being bailed out and saved from their own incompetence and greed.

Sheila Bair, once again, has shown that she may be the one financial regulator who gets it.

The Financial Times is reporting that Bair and the Federal Deposit Insurance Corp took the lead in pushing Citigroup to hire and outside consultant to determine whether the bank’s management team is up to the task of fixing the ailing financial giant.

The consultant is supposed to work with the bank’s board in coming up with a plan for potential management changes by the end of October.

Citi’s dirty pool of assets

Photo
-

Hard as it may be to believe, shares of beleaguered Citigroup are on fire.

The stock of the de facto U.S. government-owned bank is up some 300 percent after it cratered at around $1 back in early March.

The over-caffeinated stock maven Jim Cramer keeps calling Citi a “buy, buy, buy” on his nightly CNBC television show. Even the more sober-minded writers at Barron’s are pounding the table a bit, predicting Citi shares could double in price in three years.”

Cash management the Citi way

-

Is Citigroup trying to preserve cash by stiffing some of its vendors?

The other day a vendor for Citibank, the national banking arm of the defacto US taxpayer-owned bank, told me how Citi might be playing games with some of the companies that do busines with it. This vendor says he always used to get his bills paid within 30 days of submitting them to Citibank. But recently it too more than 60 days for a bill to get paid.

A mistake? Did a check get lost in the mail?

Well, according to this vendor, who didn’t want to be identified, Citibank quietly may have changed its policy for paying vendor invoices. The vendor was told that in an attempt to preserve cash, Citibank was declining to pay some invoices within the customary 30-day pay period.

The final straw with Citi

-

 ”We have and will continue to exit several forms of proprietary risk-taking. Where we continue to take principal risk, we will only do so when we have proven teams and a clear source of advantage.” – Citigroup CEO Vikram Pandit on January 16, 2009. 
   
Don’t be fooled by Vikram Pandit’s playing the part of a prudent banker.

Instead of scaling back risky hedge fund-style trading, Citi is doing just the opposite. And that raises big questions about why the federal government continues to bail out this basket case of a bank, and why Pandit is allowed to remain at Citi’s helm.

The Citi dump

-

City landfills aren’t pretty places. Much the same can be said for Citi Holdings, the newly formed dumping ground for Citigroup’s most ailing and malodorous assets.

Earlier this year, the de facto government-owned bank created Citi Holdings as a repository for assets that it either planned on selling or would simply have a hard time giving away. In truth, Citi Holdings really isn’t a distinct company. It’s merely part of a PR strategy to get investors to focus on the businesses that are going well at Citi and which are housed in a so-called good bank called Citicorp.

A Tale of Two Citi’s

-

Here’s a summer quiz: Identify the following two US banks:

1. This institution has been profitable throughout the credit crisis. Last year, it reported net income of $6bn on revenues of $60bn, despite taking big hits in its consumer operations in North and South America in the fourth quarter. At the end of the first quarter the bank had total assets of $958 billion, supported by a healthy deposit base of $660 billion.

2. The second institution lost a massive $36 billion last year. Even net revenues were negative to the tune of almost $7 billion. This bank had a $662 billion balance sheet at the end of the first quarter, but deposits of just $88 billion.

Pandit buys time with Citi reshuffle

-

– Peter Thal Larsen is a Reuters columnist. The views expressed are his own –

Notch up a win for Sheila Bair. It’s hard to see the latest management shake-up at Citigroup as anything other than an attempt to placate the combative chairwoman of the Federal Deposit Insurance Corporation.

The shuffle Citi needs

-

Citi CEO Vikram Pandit keeps moving around the deck chairs, but the one chair he still won’t move is his own.

The latest management shuffle at Citi seems more designed to appease the federal government–the bank’s largest shareholder–than anything else. Moving people in and out of jobs gives the appearance that Pandit is really shaking Citi up. (Here’s a report from Reuters on the latest management shuffling).

Derivatives league table

-

Goldman Sachs is moving up the derivatives charts—with a bullet.

In the latest ranking of US banks with large derivatives exposure, Goldman moves up from fourth place to second, according a report from the Office of the Comptroller of the Currencey. The notional value of Goldman’s derivatives contracts at the end of the first quarter was $39.9 trillion, up from $30.2 trillion in the fourth quarter of 2008.

Goldman leapfrogged over Citigroup and Bank of America. The total value of derivatives contracts is down a bit at Citi and holding steady at BofA compared to the fourth quarter. That’s not too surprisingly, given that those two banks continuing problems with troubled assets on their balance sheets.

No fix for the derivatives monster

-

It’s still not clear if the Obama administration has a plan for dealing with the derivatives monster, which is one of the biggest problems regulators must confront in dealing with the potential collpase of a “too big to fail” financial institution.

The administration’s financial regulatory reform package would give the FDIC, and in some cases the SEC, broad authority to transfer a firm’s derivatives book to a “bridge instititution” to avoid “termination of the contracts by the firm’s counterparties.” But that may be easier said then done.

  •