Wednesday, December 17, 2008

U.S. to closely scrutinize Citigroup

And why shouldn't they? What has Citigroup done right? The taxpayer guaranteed $270 billion of garbage securities, and now Citigroup thinks they can go out and buy deposits with mergers and waste more money?

Instead they get the banks the FDIC says that they need!

Regulators also are playing an active role in potential acquisitions by Citigroup. In some cases, regulators such as the Federal Deposit Insurance Corp. have approached Citigroup to gauge its interest in buying troubled banks, hoping the move would strengthen Citigroup's liquidity by providing it with new deposits. In other instances, the government has told Citigroup to back away from deals that seemed overly ambitious .

And now regulators want to take a second look at their books. Do these bankers even know what is on their books? Or how about off their books? So a governement accountant will come to the rescue. Does he come in with a Superman cape also?

Federal banking regulators have toughened their scrutiny of Citigroup Inc., becoming involved in internal discussions about the company's strategic direction and discouraging executives from pursuing certain acquisitions, according to people familiar with the matter.

The unusually close degree of oversight is the culmination of mounting regulatory concerns about the New York company's financial situation in the past year. Until recently, the government hadn't taken an especially assertive stance supervising Citigroup.

Come on, these banks, as they exist now, with asset prices where they now are, are insolvent. Does anybody not know that? And why aren't these banks slashing rates on mortgages across the country instead of buying credit default swaps on every derivative they can get their hands on?

Finally the Fed has pushed rates low enough, so money eventually will be forced to find a better home than zero percent on T-bills. An asset prices can go up. All those people worrying that inflation will rear it's ugly head, can forget about that until deflation in stock prices and homes ends. And there is no magic wand to turn around the mortgage industry on a dime. It takes time, and it also takes better weather!

But it takes a while for the stock and bond investor patient to heal. Most of them are too traumatized!


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