But we still won't break up Citigroup

A $285 million fine for fraud claims? Chump change. Every real progressive knows that because of its bloat, its financial ill-health, and its scheming, even though Citi and its predecessors have been bailed out at least once a decade, it's time to change that now.

And, every real progressive knows we won't. Treasury Secretary Tim Geitner, who ultimately does President Obama's bidding, has refused in every way possible to do this.

Again, that's why the one-third or more of Occupy Wall Street who think Obama is the answer are idiots.

More seriously, I'm reading Ron Suskind's "Confidence Men" right now. We had a great chance to either nationalize or break up Citigroup just before Timmy G. announced his vaunted "stress tests," and he did exactly as I noted ... he ignored  Christina Romer and others, who seemed to have at least a partial ear of Obama's on this issue, and refused to countenance doing anything to the bloated bank.

Joe Nocera's review of "Confidence Men" provides more details on this incident.

The most explosive allegation in “Confidence Men” concerns one such instance, early in the Obama presidency, when several top White House advisers, including Summers, wanted to “wind down” and restructure Citigroup, the most troubled of the too-big-to-fail banks. Obama liked the idea; it would show, he thought, that the government was willing to tackle the predicament of the banks and their toxic assets head on, and would set the proper tone for the way his administration planned to treat the banks. But Geithner, Suskind writes, strongly opposed the idea, so he just waited for the moment to pass — and for the president to forget about it. Suskind flatly labels Geithner’s action a “fireable offense.” 

But, he wasn't fired. As far as we know, he wasn't even given that severe of a dressing down. Or any. And, in Suskind's level of detail, if Geithner had been called on the rug, we'd know about it.

Banksters fess up to illegal mortgage problems

Wells Fargo, Bank of America and Citigroup, as part of annual financial filings with the SEC, admitted that state attorneys general investigations (and a lame-o one by the feds so far) into their, well, illegal use of MERS software in mortgage paperwork filings could well be a financial deadweight and not just a perception issue.

“The current environment of heightened regulatory scrutiny has the potential to subject the corporation to inquiries or investigations that could significantly adversely affect its reputation,” Bank of America said in the filing.

The state and federal inquiries “could result in material fines, penalties, equitable remedies (including requiring default servicing or other process changes), or other enforcement actions, and result in significant legal costs,” Bank of America said.

Wells Fargo said in its filing that it was “likely that one or more of the government agencies will initiate some type of enforcement action,” including possible “civil money penalties.”

Well, boo-hoo. Dr. America prescribes 30CCs of "cramdown" for the sick bankster patients.

More seriously, here's my tentative grand bargain:
1. State AGs as a group, agree to suspend investigations, both on the illegal use of MERS, and on banks wrongfully repo-ing deliquent-mortgage homes to which they don't have clear title in particular, for 18 months.
2. In exchange, without admitting guilt for past use, the banks agree that MERS, by not providing actual paperwork to county clerks, is illegal in all such states with such a requirement, and stop using it ASAP. (I'm assuming they're still using it, in the middle of this mess.)
3. Banks agree to triple their current mortgage-modification programs.
4. Banks agree to reveal what "minimum," as percentage of mortgage principle, they currently have as a cutoff rate for walkaway deals and other mortgage modifications, and to lower that minimum by 10 percentage points.

That's just some back-of-the-napkin figuring. I'm guessing that, given this was part of an SEC filing, that doing all of that would still hit the bottom line no harder than would state financial penalties, should the banksters dig in their heels.

Will shareholders turn on 'too big to fail' banks?

At least, will they turn on the ones that put salaries above profits?

Seriously, how can the stock price of a Citigroup or Morgan Stanley be above 10 cents a share right now?

Geithner fiddled at NY Fed while Citigroup burned

The New York Times has a long, in-depth article on just what Tim Geithner did, and didn’t, do as chairman of the New York Federal Reserve Bank.

My takeaways?

1. If you want real financial regulation, make at least the NY Fed, if not all 12 regional Feds, government institutions, not private banks. To that degree, it’s not totally fair to blame Geithner for everything that happened on his watch in New York. It IS fair to blame him if this isn’t part of his financial reregulation proposal.

2. Geithner, like his boss, doesn’t like confrontations.

3. As a result of No. 2, and his previous non-banking background, he may be too trusting of financial institutions.

4. By selecting Geithner as his Secretary of the Treasury, in light of Nos. 2-3, President Barack Obama may have been sending a “don’t stroke out” message to Wall Street.

5. Geithner has a lot of personal blame for Citigroup’s catastrophe continuing on its not so merry way.

But, take a look for yourself.

Bank nationalization just around corner at Citigroup

The government could wind up holding as much as 40 percent of Citigroup stock shortly.

Citi reportedly wants to keep the government “infusion” no higher than that, BIUT…

If it’s no fessing up to being that sick, it doesn’t have much talking space.

More on the Citi situation here

More for Geithner to worry about than bad taxes

Try NY Fed incompetence

His oversight of Citigroup, as New York Federal Reserve head, pretty much was a pile of crap. And, given the Geither-Robert Rubin degree of connectedness, this is surprising?

The story notes that the New York Fed, in a key period, relaxed oversight as Citigroup went on a risky spree, and that the NY Fed’s regulatory group reported directly to Geithner. It adds that, even as Citigroup’s risky practices started falling apart last year, the Fed brought no public enforcement case, even though examiners privately sent a critical letter to the company in the first half of 2008.

Citigroup even expanded, more than doubled, its subprime mortgage offerings in 2006, even as many other lenders cut back.

Read the full story for how Geithner not only could have known better, but DID know better, and still didn’t DO better.

Plus, if you’ll go to the last page of the article, you’ll see clear indications about how he was misreading the depth of the looming crisis as late as the middle of last year.

Do we really want him as Secretary of the Treasury?

So long, Bob Rubin; don't let Citi's door ...

Hit you in the ass on the way out.

Yes sir, the non-Republican most reponsible for our current economic clusterfuck (Well, ties in that honor with Obama's economic Swengali, Larry Summers), is leaving Citigroup.

Rubin has made $115 Mil in consulting (about what, I don't know), etc, for Citi since 1999. He's going to work on non-profit causes, he says. Funny, since Citi has lost $20 million in the last year, I'm sure many people would say he's ALREADY been doing nonprofit work.

His defenders claim he was just hired as a rainmaker. Right.

Speaking of which, MarketWatch also has a news analysis story on the depth and breadth of Rubin's damage-making, not rain-making, not just limited to finances, but bad corner office hires and more.

Citigroup bailout NOT the light at end of tunnel

First, there’s plenty of indications GE is shaky. Probably not shaky enough to need a bailout, but shaky nonetheless. And, who knows who will line up at the hog trough next?

As for the bailout itself, we’re paying more for the company than it’s worth on paper right now? At least it’s not a total pig in a poke. Dividends above 1 percent are forbidden. That’s about the only silver lining here; the turds in the punchbowl are legion, including Citi folks who got it into this mess getting to keep their jobs.

Otherwise, We the People are supposed to eat up to 90 percent of Citi’s bad money. (What happened to the “bad bank” being touted last week? I guess We the People are the bad bank.)

And its sheer size has analysts thinking that we could indeed still have further trains coming down the track like this:

“It looks enormous in size and scope,” said Tony Morriss, senior currency strategist at ANZ Bank in Sydney. “Does this mean support for other financial institutions will be this big? Does this mean there will be more problems around calculation of so-called toxic assets?”

And, it was a big enough big in a poke to let CEO Vikram Pandit stay on the job, which means the Paulson Gang still refuses to hold up a “oral hazard” standard:

“You’re seeing an inept management team being rewarded by the U.S. government,” said William Smith, chief executive of Smith Asset Management in New York, which owns Citigroup stock.

And, while the Paulson Gang continues to fret over massive banks like Citi, and BushCo says bank mergers will just solve all our problems, your Main Street-level banks are still doing well, Washington Monthly says.

Oil spikes, GM craters, Dow slumps

GM hit its lowest price in more than $50 years and oil crossed the $140/bbl mark, all combining to drive the Dow to a 2008 low, below 11,500.

Oil surged on talk of Libyan production cutbacks and talk by OPEC that prices could break $150. While other news has played up the talk of Libyan cutbacks due to possible terrorism-related sanctions, to me, the OPEC talk was the big thing.

Chakib Khelil, president of the Organization of the Petroleum Exporting Countries, said he believes oil prices could rise to between $150 and $170 a barrel this summer.

Remember, this comes directly on the heels of a pledged production increase by Saudi Arabia.

Khelil cited the strength of the Euro and weakness of the dollar, among other things, but the Algerian energy minister may also have been doing some muscle-flexing against Riyadh:

“The Saudis go out of their way to have this specific meeting outside the OPEC frameworks, and if you’re the OPEC president, you want to be important, so you come out of it and say $150 to $170,” said Roger Read, an analyst at Natixis Bleichroeder in Houston. “He’s trying to prove he matters and OPEC matters and the Saudis don't make all the decisions.”

If Read’s right, Khelil accomplished what he intended.

Meanwhile, GM stock sagged to a point not seen since 1955. It’s so bad that Goldman Sachs issued an unusual “sell” warning.

Elsewhere this week, I’ve heard some analysts claim that GM may burn through almost all of it’s capital by the end of 2010. So, if the Volt fizzles, it’s bankruptcy?

Seriously, who would be dumb enough to lend GM major amounts of money right now?

To complete the trifecta, Citigroup hit a 10-year low. The usual for the financial sector — mortgage derivates exposure.

Credit woes continue

Citigroup expects to lose $5bil and will cut an additional 9,000 jobs.

But, because this loss was “expected” and half the loss of the previous quarter, the Street treated this as a big positive. More proof of the separation of Wall Street from Main Street.

Meanwhile, some investment bankers and even an outspoken Fed governor think the Federal Reserve needs to do more to get banks to rein in exuberance.

Your Tuesday financial woes

For the past several weeks, on the Street, it seems like on Mondays, the bulls have had a restful weekend, take the weekend’s “no news is good news” bit in the teeth and run with it. Then, Tuesday, reality sinks in; this week, a 150-point drop in the market by noon.

The reality always has some specific facts. The biggest one today?

The recent injection of sovereign wealth funds into Citigroup Then, Tuesday, may not save it:

Citigroup shares dropped more than 6 percent Tuesday after the head of Dubai International Capital said that Mideast sovereign wealth funds may fail to save Citigroup unless more cash is pumped into the bank.

Samir al-Ansari, chief executive of the $13 billion government-owned investment firm, said at a private equity conference that it will take more than the combined efforts of the Gulf's wealthiest investors -- the Abu Dhabi Investment Authority, the Kuwait Investment Authority and Saudi Prince Alwaleed bin Talal -- to save the U.S.-based bank.

So, Ansari is trolling for money money to bail out Dubai. Do Arab (or Chinese) funds think Citi can be rescued, or do they look at such an attempt as pounding sand down a rathole? Even if they think that is likely, are they attached too much to what would in that case be “bad money” to chase it anyway?

If analysts are right that Citi could have to write off as much as another $18 billion, on top of $18 billion written down in January. If I’m the manager of a sovereign wealth fund, I’d wait for Citi’s stock to drop further, at least, along with any additional shoe-dropping, before I buy in.

Here it comes: foreign bank buy-ups

The Abu Dhabi Investment Authority’s $7.5 bil buy into Citigroup got all the publicity, but Singapore bought a $10 bil chunk of UBS recently, too. It’s striking to note that both purchases were made on terms that put the American companies’ stock valuation at little above junk-bond status.

So, what’s next? A tightening of the lending spigots. Singapore didn’t get to the level of development it has today by throwing around nickels like manhole covers.

Maybe, the venerable Singaporean practice of caning will get exported the boardrooms of UBS and other American financial institutions while we’re at it. It couldn’t hurt.