Crisis Diary as it unfolds ….

17-Nov-08 to 23-Nov-08: The Citi never sleeps?

So it was now Citi’s turn this week. Citi trounced GM in later days of the weeks in bankruptcy news section and by the end of the week, Citi was sitting on truckload of taxpayers money in yet another wall-street bailout by dear uncle Sam. Can they now really deny the bailout to GM? Or Chrysler or Ford or GE or whoever? Every American firm is just too big to fail and Uncle Sam is going to end up owning whole load of crap.
There was across the board agreement between economists that Citi bailout was really bad deal for taxpayers. Citi’s share price jumped 60% on the deal and that sums it up.
Mark Thoma has collected reactions of different economists on Citi bailout here.

The state of Citi’s balance sheet is really painful.
As of Sep’08,
Citi’s Assets (i.e. loans) = 2.05 T$
Citi’s liabilities (i.e. deposits etc.) = 1.92 T$
Citi’s equity = Assets – Liabilities = 126B$ (out of this 25B$ belong to Fed in first capital injection)

This is as of Sep’08. Now fast forward to Nov and we have 300B$ out of 2.05T$ in questionable loans. Result: Citi can go in negative equity by massive -170B$. So Fed had to step in by guaranteeing 300B$ of Citi’s assets. But while doing so they made sure citi’s efficient management continues to get its fat pay check and shareholders are not wiped out.

On the street, there is also a buzz of massive Obama stimulus – somewhere in the range of 700B$. With all this $ flooding all around, is US$ on the brink of collapse?

Crisis watch for the week:
TED spread 2.12
VIX 80.86
S&P 500 800.02 (WoW return -6.71% )

List of institutions went bankrupt/bailed out/taken over:
1. Bear Sterns
2. Merill Lynch
3. Lehman Brothers
4. Fannie Mae
5. Freddie Mac
6. AIG
7. Washington Mutual
8. Wachovia bank
9. Citibank


November 24, 2008 - Posted by | Crisis Snapshot

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