“Treasury and the Federal Deposit Insurance Corporation will provide protection against the possibility of unusually large losses on an asset pool of approximately $306 billion of loans and securities backed by residential and commercial real estate and other such assets, which will remain on Citigroup’s balance sheet. As a fee for this arrangement, Citigroup will issue preferred shares to the Treasury and FDIC. In addition and if necessary, the Federal Reserve stands ready to backstop residual risk in the asset pool through a non-recourse loan.
In addition, Treasury will invest $20 billion in Citigroup from the Troubled Asset Relief Program in exchange for [$27 billion of] preferred stock with an 8% dividend to the Treasury. Citigroup will comply with enhanced executive compensation restrictions and implement the FDIC’s mortgage modification program”
Citigroup pre-market futures indicate a sharp recovery from Friday’s lows. The stock is up 60% to $6. Dow and S&P futures are up as well.
You thought we are the only one to be affected by this crisis. Thing again!
Germany became the latest, and by far the biggest, European country to explicitly guarantee the deposits in banks held by their citizens, in a move announced Sunday.The German government moved Sunday night to save Hypo Real Estate with a 50 billion euro ($68 billion) rescue package one day after the troubled property lender said an earlier rescue plan had fallen apart, according to media reports.
Executives from AIG, bankers and Treasury and Federal Reserve officials are meeting today on the company’s situation at the New York Fed. A number of options are under being discussed to fill a shortfall of $75 billion to $100 billion in funding, one of the people said.
In a bid to save financial markets and economy from further turmoil, the U.S. government agreed Tuesday to provide an $85 billion emergency loan to rescue the huge insurer AIG. The Federal Reserve said in a statement it determined that a disorderly failure of AIG could hurt the already delicate financial markets and the economy.
Just an update on my previous call.
Fannie/Freddie collapsed Monday as I predicted a few months ago.
Lehman imploded today due to capital concerns. I mentioned before that Lehman might be the next one to go down in history. They are having a hard time securing financing from foreign lenders (well what da ya expect?). I doubt that Fed/Treasury will bail out Lehman. But you never know. What’s another trillion dollar debt ehh? Let’s print more dollar.
Whoever called the bottom in Financials or Housing are proven dead wrong again. These bottom callers must live in a different planet. I think this Financial train wreck will face one hell of a climax ending.
—————————————————————————————————————————
I think Lehman’s days are numbered. Even though they may not end up like Bear Sterns, they are in serious trouble here.
I read this on Yahoo messageboard which I thought was a pretty good analysis on Lehman’s current position.
Problems:
1) Earnings power. De-leveraging reduces LEH’s ability to make money. (if you need this explained you are too stupid for words)
2) Markdowns on “assets” reduce book value; big markdowns are coming.
3) Longs are crowing about the stock being at $34??? It was $45 two weeks ago. Hmmm, who’s winning?
4) Negative press is limiting LEH customers trading which is another strike to earnings.
5) Business model broken. It is agreed that LEH will need to reinvent itself in order to grow earnings. Nobody has offered an explanation of how.
6) Uncertainty about forward numbers. The market LOATHES uncertainty and LEH epitomizes it.
7) LEH’s top fixed income strategist has acknowledged that problems aren’t easily remedied and that the next few years should prove problematic. YEARS!!! ouch.
8) shorts are being attacked which generally means that they’re onto something otherwise they just lose money and go away. That doesn’t seem to be happening here does it?
9) The FED members, while openly offering to lend to LEH, have said that the BSC action was a bad move which is unlikely to be repeated.
10) still no rebuttal of Einhorn’s comments with factual data supporting their position.
11) seeking new capital even though they “don’t need it” seems like an admission that the pretty picture they paint has been misrepresented to some degree.
New York, 11:00 PM EST - Just a quick update before I sign-off for the night. Asian markets and U.S Market futures are responding very well to the Freddie and Fannie bailout news. U.S Market Futures
S&P 500 +35.30
This is a bail-out of creditors - China, Japan, Russia and PIMCO at the expense of Shareholders and U.S taxpayers
By now, most of you must have heard the breaking news in the Financial sector.
Federal Reserve Chairman Ben Bernanke, Treasury Secretary Henry Paulson, and CEO of Fannie Mae (FNM) and Freddie Mac (FRE) held some some high level meetings yesterday to discuss the U.S bailout of the two mortgage giants.
U.S government cannot let Fannie and Freddie fail because foreigners own $36 billion of that outstanding debt. If these mortgage giants fail and the foreigners start pulling the money out of the system, this house of cards will come crashing. So, the charade goes on. Freddie and Fannie are the most corrupted, mismanaged and badly run organization in the country (10 times worse than Enron).
After all, it is sad that taxpayers are the one who has to bite the bullet and pay for this expensive bill. But wait, Federal Reserve can just crank up the printing presses and roll out those juicy new dollar bills. Problem solved. That is until it finally implodes. At some point, those foreigners will be pulling out their money as they would not be that dumb to stick around till the very end. The way our govt run our system is beyond comprehension.
Bill Gross bond guru from Pimco holds a major chunk of these distressed debts. in his note to his clients he said “The bill for our collective speculative profligacy, obvious in the deflating asset markets, can be paid now, or it can be paid later. The tab will be less if paid up front, than if swept under a rug …”. Gross plea is heard well by Fed and Treasury. This is the same person who sold short on the very same asset securities last year and made money. Now he wants U.S govt to come bail him out? Interesting.
Strangely, ut Financial sector reacted positively after the market hours (except of course Freddie and Fannie stocks) in the hopes that this bailout will save rest of the Financial industry. Freddie and Fannie stockholders equity will be wiped out if this plan goes through tomorrow.
My bet is that Financial stocks will initial react positively and then will come crashing back to earth. This is a repeat of Bear Sterns saga which will only end ugly.
![Freakonomics[Revised and Expanded]](/images/21xRHBWYYML.jpg "Freakonomics[Revised and Expanded]")
11:00 PM EST - Just a quick update before I sign-off for the night. Asian markets and U.S Market futures are responding very well to the Freddie and Fannie bailout news.