The biggest problem here today is that Citigroup has both a liquidity and solvency issue.  Thy’re working to calm their investors, but the market is already so shell-shocked from the other failures to date that these reassurances are falling on deaf ears.  In retrospect, it’s easy to see how big a blow losing the bid for Wachovia was and following that with an announcement announcing the elimaination of 52,000 jobs worldwide compounded the problem from a public relations standpoint.

The good news is that Citi is trying to control costs.  They are reducing expenses.  They are making the changes necessary.  They have people willing to invest in them and idiots analysts willing to give them a buy rating even now.  The bad news is that, like so many others, there is a considerable unknown as to the extent of Citi’s losses and damages from their derivatives portfolio.  Add to that the job losses which will ultimately reduce consumer’s ability to pay their Citicard debts and you have what are likely too many unknowns for even a company of this size.

Finally, though, you’re going to hear what I think is wrong with Paulsen’s plan and the way that he has been using Tarp funds.  Forget about AIG.  Forget about the Big 3.  Think back to what the original funds were approved for – to prop up the financial sector.  Citigroup is a cornerstone of what most consumers see as the financial market – Paulsen should be making every effort to shore up their perceived value and their ability to prevail in these tough times.  Show America, without splashing it across the media, that Citigroup deserves to survive as much as AIG.

Can you imagine what it would do to consumer confidence if all of a sudden their Citibank card was declined in the market because the government was unwilling to pitch in and lend a hand when Citigroup and the country needed it most?  It’s unimagineable for me and I can’t see a scenario where this isn’t followed by the failure of bank after bank after bank.

Ranter