So how is the Fed going to convert Citi's preferred into common and magically create some equity? Look at the above chart. In Citigroup's case, it has $28.5 billion of deferred tax assets, that sits on their balance sheet--The same "assets" that did in Fannie and Freddie. Is it any wonder why Citigroup is toast?
Citigroup's figure of TCE also doesn't include the hundreds of billions of off-balance sheet items. But somehow, you, the taxpayer, are, with Geithner's blessing, going to convert your preferred stake in Citicorp to equity.
What kind of a joke is that??? What is with this smoke and mirrors?? Why do you think Geithner wants to give you, the taxpayer Citigroup's equity?
Because it's worthless!
Subtract the $28.5 billion of deferred tax assets from Citi's TCE, and Citi's leverage goes up to 360X, and Citi's Tangible Common Equity goes to zero.
And that's what you the taxpayer will get, with this new cramdown from Geithner.
The same Treasury Secretary that won't allow judges (so far) to cramdown the mortgage principle in bankruptcy, but he will surely cram down Citi's worthless equity to the taxpayer!