Word: bankes
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Citi is not the first bank to hit the wall. When Washington Mutual, which had a balance sheet less than a third the size of Citi's, went down, the FDIC immediately flipped the company to JPMorgan Chase. But marrying off Citi was not a viable option. "There isn't anyone to hand Citi to," says Roy Smith, a professor of finance at New York University's Stern School. "This is the King Kong of banks." (See pictures of the global financial crisis...
...What are the chances we'll have to save Citi yet again? There are still plenty of questions about Citi's long-term health. The government's rescue addresses $306 billion worth of troubled assets from Citi's $2 trillion balance sheet. The bank, though, has roughly another trillion dollars in assets that aren't on its balance sheet but kept in entities somewhat removed from the company. These assets could be problematic if the economy grows worse. Fox-Pitt Kelton's Trone also points out what's not included in the government backing: $129 billion in nonresidential consumer loans...
...which wasn't smart," says Neil Stern, senior partner at McMillan Doolittle, a Chicago-based retail-consulting firm. That half-billion-dollar acquisition is currently up for sale, but no one is biting. Meanwhile, outdoor-apparel shop Eddie Bauer emerged from bankruptcy in June 2005 with a $450 million bank loan, which left it highly leveraged and low on cash. "While their same-store sales are down only 1.1% and they're performing pretty well compared to the rest of apparel retailers, it's difficult to do a turnaround in a bad market," says Stern...
Obama also nominated Timothy F. Geithner, current chairman of the Federal Reserve Bank of New York, as Treasury Secretary, a position which Summers held under President Clinton from 1999 to 2001 and for which he was short-listed this time around...
...reaction to the plan was swift - and far from the general applause Britain's leaders received for their bank-bailout plans just six weeks ago. "A general decrease in value-added tax is perhaps the answer for some countries, but for Germany and France it is not," said German Chancellor Angela Merkel, following a meeting with French President Nicolas Sarkozy on a common European response to the economic downturn. Asked Sarkozy: "Should we use up our available room for maneuver on reducing prices when prices are already falling...