-
-
Re: Citigroup Doesn't Deny Prince Exit
After observing what happened at Merrill last week, there should be quite a number of failed CEOs waiting in the ante rooms of their Board Chairman's suite, offering to "retire". :rolleyes:Originally posted by Rajiv View Post
Ain't capitalism wonderful! -
Re: Citigroup Doesn't Deny Prince Exit
The analyst that downgraded Citigroup reports she'd received multiple death threats.
http://news.moneycentral.msn.com/pro...104&ID=7756737
Lovely. That's one way to scare anyone in the future into toeing the corporate line if they think about downgrading.Comment
-
Re: Citigroup Doesn't Deny Prince Exit
Well at least her husband seems to have good qualifications as a bodyguard...;)Originally posted by rj1 View PostComment
-
Re: Citigroup Doesn't Deny Prince Exit
Look at a 5-year chart on C, http://bigcharts.marketwatch.com/int...w.x=0&draw.y=0 even before Thursday, its recent lows surpassed all lows to back into 2003, and this CIBC analyst, FINALLY, steps up and downgrades it to a market underperformer. I hope she is well compensated for being on top of somethings besides bonars.Originally posted by rj1 View PostJim 69 y/o
"...Texans...the lowest form of white man there is." Robert Duvall, as Al Sieber, in "Geronimo." (see "Location" for examples.)
Dedicated to the idea that all people deserve a chance for a healthy productive life. B&M Gates Fdn.
Good judgement comes from experience; experience comes from bad judgement. Unknown.Comment
-
Citigroup's Prince Steps Down, Rubin Named Chairman
Citigroup's Prince Steps Down, Rubin Named ChairmanComment
-
Re: Citigroup Doesn't Deny Prince Exit
Adjust the price changes for the depreciation of the $ and this thing looks like it's headed for Chapter 11... :rolleyes:Originally posted by Jim Nickerson View PostComment
-
Re: Citigroup's Prince Steps Down, Rubin Named Chairman
Brady Willett at FallStreet...
November 5, 2007
Rubin’s Cube
On November 8, 2001 Robert Rubin called senior Treasury Department official Peter Fisher and asked him if he could tell the bond rating agencies to hold off on downgrading Enron. Mr. Rubin, who served as Treasury Secretary from 1995 to 1999, was clearly using his high-up contact(s) in an attempt to influence the supposedly non-biased rating agencies, and he was doing so because he worked for Citigroup, a large Enron creditor. When Fisher declined to go along with the scheme Rubin agreed that it was probably not a good idea after all (what else could he do?). The media barely covered the story, no official inquiry was made, and Robert Rubin didn’t go to jail.
Given that Robert Rubin is going to be the new Chairman of Citigroup, you would think that shareholders would be up in arms. After all, how can someone with Mr. Rubin’s suspicious track record be trusted? But alas, Robert Rubin is a member of the fabled “Committee to Save the World”. If he can not bail Citigroup out of its current mess who can?
The reality is that Rubin, while regarded as an extremely influential figure, is not a miracle worker. The conditions that allowed Greenspan and Rubin to run amuck with their bailouts in the 1990s are no longer present today. It is also worth remembering that despite his efforts Rubin failed to stop the Enron implosion from happening, and he also underestimated the turmoil currently surrounding Citigroup and others.
Can The Puzzle Ever Be Solved?
The real story isn’t that Rubin is a hero or villain, but that following the collapse of Enron FASB and the SEC failed to enact simple and tough accounting standards that forced companies to keep any and all financial exposures on their balance sheets. To be sure, the off balance sheet dealings that helped Enron conceal its insolvency are being reincarnated today with untold SIV exposures because the SEC and FASB failed.
Incidentally, FASB and the SEC had a near impossible job to do: there were hundreds of Rubin-like figures lobbying and making secretive phone-calls to water down the post-Enron accounting standards investors are forced to cope with today. Why not make these calls when the punishment for getting caught in the act is to one day become Chairman of Citigroup?
In short, it is the calls that Rubin and others make, most of which we never find out about, that make it impossible for regulator and investor interests to perfectly align.
http://www.fallstreet.com/nov507.php
Comment
-
Citigroup may face $11 bln writeoff
http://today.reuters.com/news/articl...-3-PICTURE.XML
Now we are talking! Fireworks ahead...NEW YORK, Nov 4 (Reuters) - Charles Prince resigned on Sunday as chairman and chief executive of Citigroup Inc (C.N: Quote, Profile , Research), as the bank said it may write off $11 billion of subprime mortgage losses, on top of a $6.5 billion write-down last quarter.
Comment
-
Re: Citigroup Doesn't Deny Prince Exit
Sapiens,
The question is, is the $11B truly the normal kitchen sink when there is a change in management, or is the ugliness so bad it must be spread out over time (and this is the first installment)?
My vote is for the latter.Comment
-
Re: Citigroup Doesn't Deny Prince Exit
I agree. Take a look at this:Originally posted by c1ue View Post
HEARD ON THE STREET
http://online.wsj.com/article/SB1194..._whats_news_us
Why Citi Struggles to Tally Losses
Swelling Write-Downs
Show Just How Fallible
Pricing Models Can Be
By CARRICK MOLLENKAMP and DAVID REILLY
November 5, 2007; Page C1
When the market for mortgage securities entered a meltdown over the summer, financial firms holding billions of dollars of hard-to-trade assets used mathematical pricing models that were heavily dependent on credit ratings. When the credit-rating firms began a massive downgrade campaign last month, firms such as Citigroup Inc. and Merrill Lynch & Co. saw the value of their holdings plummet.
Citigroup's struggles to put an exact number on its losses demonstrate just how fallible the models can be, and how serious the consequences. Last night, Citigroup said that the downgrades will result in a reduction of fourth-quarter net income of $5 billion to $7 billion. That follows a third quarter when Citigroup recorded mortgage-related write-downs of $2.2 billion, including losses on subprime securities and fixed-income trading.
The latest update, much of it involving securities linked to subprime mortgages, follows a revision made late last month by Merrill Lynch that increased third-quarter write-downs to $7.9 billion from an earlier estimate of about $4.5 billion for exposure to debt pools and subprime loans. As a result, analysts are beginning to see Merrill's big hit as less of an anomaly than originally thought.
"We estimate that there's over $10 billion of write-downs in the fourth quarter for the industry for banks and brokers," said analyst Mike Mayo, who covers financial firms for Deutsche Bank. Mr. Mayo said his estimate is based on exposure to debt pools and mortgage securities and includes Citigroup, Bear Stearns Cos., Morgan Stanley and Bank of America Corp. Citi's updated write-downs could be included in its coming quarterly filing with U.S. securities regulators.
The source of Citigroup's write-down is at least as significant as its size. The bank's estimate of its losses has changed so rapidly in large part because the models it used to value hard-to-trade securities relied heavily on credit ratings, according to people familiar with the models.
That made the bank highly vulnerable when, in October, ratings firms Moody's Investors Service and Standard & Poor's slashed, or put on watch for downgrade, the ratings on tens of billions of dollars in securities.
It is unlikely that Citigroup is alone. Ratings play a big role in valuation models used by many banks, investment funds and insurance companies. Meanwhile, the market for securities linked to subprime loans has deteriorated in recent weeks as defaults have confirmed some of analysts' most dire forecasts, increasing the likelihood of further ratings downgrades.
Citigroup's subprime exposure -- and source of its problems -- is found in two big buckets that together total $55 billion in its securities and banking unit, the bank said. The first bucket totals $11.7 billion, including securities tied to subprime loans that were being held, or warehoused, until they could be added to debt pools for investors. The second, totaling $43 billion, covers so-called super-senior securities.
These highly rated super-senior securities are portions of collateralized debt obligations, or CDOs. CDOs are repackaged pools of lower-rated securities backed by subprime loans into pieces with different levels of risk and return. Analysts estimate that $60 billion in such super-senior tranches are sitting on the books of banks, insurers and investment funds.
The troubles stem back to the heyday of the U.S. housing boom, when Citi became one of the biggest players in the lucrative world of CDOs backed by subprime-linked bonds. Overall, Citi was the second-largest underwriter of CDOs in 2006, doing $34 billion in deals, according to data provider Dealogic.
As a result, Citi's holdings of subprime exposures varies from the actual loans to the most highly rated slices of CDOs, the bank said. They include securities the bank had warehoused to later package into CDOs, extended to the super-senior tranches of CDOs that Citi helped create. Banks often kept the super-senior pieces of CDOs, because their low returns made them unattractive to investors despite their extremely high ratings.
In a statement, Citigroup said the declines in the value of the bank's subprime exposure "followed a series of rating-agency downgrades of subprime U.S. mortgage-related assets and other market developments which occurred after the end of the third quarter."
When trading in the subprime-linked securities all but dried up amid this summer's credit-market turmoil, Citigroup and other banks suddenly faced the difficult task of putting a value on securities that investors no longer wanted to trade.
For lack of any market pricing, Citigroup used credit ratings as a key input in figuring out the value of the future payments it expected to receive on the securities, according to a person familiar with the bank's valuation models. For example, in valuing the payments on pieces of subprime-backed CDOs with the highest triple-A rating, the bank would look to how the market was valuing payments on corporate bonds with the same rating.
"In general, the industry-standard model for pricing CDOs is not adequate in my view, which means that there's a lot of uncertainty about what they are worth," says Darrell Duffie, a finance professor at Stanford University's business school. "They can get better models but that's not something they can do overnight."
The problem with the ratings-based approach was that it ignored a key difference between corporate bonds and subprime-backed bonds: Defaults on the latter were growing at a fast rate, which would likely lead to ratings downgrades.
The downgrades began in earnest Oct. 11 when, in a little-noticed announcement, Moody's Investors Service said it had slashed credit ratings on about 2,000 bonds backed by subprime home loans that originally carried a total value of $33.4 billion. It also flagged bigger problems ahead, saying that 502 CDOs had direct exposure to the mortgage securities that had been downgraded.
Write to Carrick Mollenkamp at carrick.mollenkamp@wsj.com and David Reilly at david.reilly@wsj.com
Comment
For a concise, readable summary of iTulip concepts developed over the past 16 years and a vision of a challenging next decade and how to navigate it, read Eric Janszen's book "Post Catastrophe Economy".
Join the discussion of today's events with a wide range of professionals with an interest in economics and finance. Register to join our 50,000 plus member registered community from 78 countries today.
Subscribe to iTulip Select for access to the longest running, deep, accurate, and unvarnished macro economic trends analysis and forecasting available, since 1998.
- If this is your first visit, be sure to check out the FAQ by clicking the link above. You may have to register before you can post: click the register link above to proceed. To start viewing messages, select the forum that you want to visit from the selection below.
Working...
Tweet
Comment