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

The article that spurred this article for me is from WashingtonPost.com, with a headline of “Wachovia Posts the Largest-Ever Loss for a Bank.”  Dramatic.  Catchy.  Untrue – this article is full of shit.  What I get out of this after reading through the whole thing – mouth agape – is that the author, Zachary Goldfarb, believes that this title is deserving while putting the truth in the sixth paragraph.  There he writes:

Most of Wachovia’s loss — $18.8 billion — stems from writing down the value of its reputation, brand and experience, an intangible measure known as “goodwill” that mainly plays a role in setting a company’s value in mergers and acquisitions. The company lost $2.5 billion on its portfolio of loans and put away billions more to cover expected future losses.

That, to me, is a lot different than having thousands of homeowners go belly up or run away from their loans resulting in the sale of something for $400,000 that they originally loaned $800,000 on; resulting in a loss of $400,000.  This, to me, is like someone saying “we thought our company was worth $18.8 billion dollars more than it was.  Whoops.

So, was the article truthful, yeah, they did “lose” a lot of money, but  into it and saying that their loss is the most important thing here, perhaps the author could have told the American public that the tax laws that allow them to take this loss (thus paying less taxes) need to be changed in a way that doesn’t allow this extreme behavior.  Why does the media have to perpetuate the negative or walk a gray line – why can’t they report the truth?

Did Wachovia lose a shitload of money?  Yes, they lost a lot of money and I don’t imagine that they will stop bleeding red ink any time soon.  That’s fine, everyone knows that, but did they really lose $23.9 billion last quarter?  I don’t think so, but then again I don’t work for the WashingtonPost.com.

Ranter