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  • Something Something Citigroup Nationalization Something! Something Probably Bad!

    citigroupThe government has given Citigroup billions in bailout funds, and now it's looking at acquiring a 40% stake in the tanking bank. Forty percent?! That counts as nationalization, right? Oh my God, the Swedes have won. Quick, everybody act blonde!

    Wait — breaking news. Here's a statement from the Fed, the Treasury, and some official-sounding "bank regulators" about a new capital assistance plan to keep banks afloat. This better explain everything, in unconditional terms everyone can understand…

    "This additional capital does not imply a new capital standard and it is not expected to be maintained on an ongoing basis," the regulators said in their statement, in wording designed to signal that this wasn't bank nationalization.

    The regulators closed their statement with even more explicit language that tried to calm markets' fears that the government of the world's largest economy might be forced to take over private banks: "Because our economy functions better when financial institutions are well managed in the private sector, the strong presumption of the Capital Assistance Program is that banks should remain in private hands."

    Blah blah "not expected to be maintained"? A "strong presumption" that banks "should" remain private? Uhh, sorry, that sounds awfully vague and conditional.

    Financial markets should have seen the announcement as positive, but the administration's lack of a coherent message to explain what it meant and how it works sent the Dow Jones Industrial Average almost 100 points into negative territory by midday.

    There you go. Now that's what I call an unequivocal statement.

    Tags: Banks, Citigroup, Economy
  • Post-Bailout, Citigroup Buys the Road Not Taken to the Danger Zone

    Imagine, for a moment, that you're in charge of Citigroup. The government has just handed you a sack containing $20 billion and agreed to guarantee $306 billion in toxic assets that are stinking up your balance sheet. This deal comes with all kinds of fancy strings attached, like not having to make any changes to your executive management or board of directors. Nah, dude. We cool, bro.

    Then the world's partypoopers start clamoring for you to restructure, or get rid of some non-core businesses, or at least do something about the mountains of debt and bad assets that you've squirreled away under your duvet. Your stock plummets. Your CEO becomes a punch line and/or a punching bag. What do you do?

    If you answered "sink $10 billion into a debt-riddled Spanish toll road operator," congratulations! You win a debt-riddled Spanish toll road operator…

    Spanish construction company Sacyr Vallehermoso said Monday it has agreed to sell its highway-operating unit, Itinere, to alternative investment unit Citi Infrastructure Investors in a deal valued at nearly 7.9 billion euros ($10 billion).

    The sale involves 2.87 billion euros in cash and 5 billion euros in assumed debt. Citi will offer to buy all of Itinere's stock at 3.96 euros ($5.04) a share [an 18% premium], the Spanish construction company said… Sacyr Vallehermoso has been hard hit by the collapse of Spain's real estate bubble and is eager to ease its debt load.

    Using investment funds to help ease debt loads? Huh? Well, now, that's an interesting idea. I think I need a moment to process this.

    Let's crawl back under our duvets and meditate for a spell.

    Tags: Citigroup, Economy, Spain