Economics

Once More into the Bailout Breach, This Time for Citigroup

|

Bailouts, it seems, are like potato chips. You just can't have one:

Rushing to rescue Citigroup, the government agreed to shoulder hundreds of billions of dollars in possible losses at the stricken bank and to plow a fresh $20 billion into the company.

Regulators hope the dramatic action will bolster badly shaken confidence in the once-mighty banking giant as well as the nation's financial system, a goal that so far has been elusive despite a flurry of government interventions to battle the worst global crisis since the 1930s.

Wall Street investors appeared encouraged by the effort. The Dow Jones industrials were up around 90 points in morning trading, and stock markets in Britain and Germany gained more than 4 percent in afternoon trading. Citigroup shares themselves climbed 49 percent to $5.62 in morning trading.

"If they didn't help, the damage would be beyond imagination," said Teck-Kin Suan, economist at United Overseas Bank in Singapore.

More here. Indeed, this isn't even the first bailout for Citi:

The $20 billion cash injection by the Treasury Department will come from the $700 billion financial bailout package. The capital infusion follows an earlier one—of $25 billion—in Citigroup in which the government also received an ownership stake.

As part of the plan, Treasury and the FDIC will guarantee against the "possibility of unusually large losses" on up to $306 billion of risky loans and securities backed by commercial and residential mortgages.

I await the coming war between renters and on-time mortgage payers and the rest of America.

And, as someone who has credit card debt, a mortgage, and a freaking 1999 Buick in the driveway (and is a frequent flier to boot), I continue to ask, Where's My Bailout?:

NEXT: Bob Barr on Eric Holder

Editor's Note: We invite comments and request that they be civil and on-topic. We do not moderate or assume any responsibility for comments, which are owned by the readers who post them. Comments do not represent the views of Reason.com or Reason Foundation. We reserve the right to delete any comment for any reason at any time. Report abuses.

  1. I await the coming war between renters and on-time mortgage payers and the rest of America.

    Yes! I enlist. ALL renters and on-time mortgage payers should go on strike. Hold it in escrow until capitalism is restored.

    Awaiting further instructions, General Gillespie.

  2. I await the coming war between renters and on-time mortgage payers and the rest of America.

    And, as someone who has credit card debt, a mortgage, and a freaking 1999 Buick in the driveway (and is a frequent flier to boot), I continue to ask, Where’s My Bailout?:

    If someone bought their house in the last two years and is underwater, why should they continue to pay on their mortgage?

    Have bankruptcys risen yet?

    What is this war between renters and on-time mortgage owners going to look like?

    And a Buick?!?!?! LOL That is the funniest think I have read all day.

  3. Junkie Economy
    DOOOOM

  4. And Citibank is making noise about buying my very solvent bank. Oh, joy.

    I’ve had my accounts there since the 70’s and wasn’t planning on changing banks, but so much for that idea. I was going to look at BB&T, but they took bailout cash too, so fuck ’em.

    Who’s left that *hasn’t* taken the guvmint cheese bailout money?

  5. JW,

    Try a local credit union. I have a feeling most of them are too small to have received any government assistance.

  6. If someone bought their house in the last two years and is underwater, why should they continue to pay on their mortgage?

    Cuz you still need a place to live? Sheesh, the house lost some value on the market but did it really change what it was to you? (or whomever it the situation you described)

    I like fiscally responsible people so a ’99 Buick is A-ok with me but Nick, if we ever hang, we’ll take my car. Unless of course you allow smoking in yours.

    And that video was great! Luckily the doc and I won in Vegas this weekend so we don’t need a bailout for bad behavior but something weird happened at the blackjack table. We had to update banking info for our credit line; even though we’ve always paid within the 30 days required by our credit account, the Wynn reduced our credit line by 50%. Since that covered what our max loss budget was, it was no problem but it seems that some people are desperate and might be trying to cover their mortgages on the tables.

  7. that some people are desperate and might be trying to cover their mortgages on the tables.

    Get these people jobs at Treasury, stat!

    And/or, I can hardly wait to bail out their greedy stupid asses with my prudently conserved assets.

  8. I await the coming war between renters and on-time mortgage payers and the rest of America.

    We are mightily pissed off.

  9. Well, I guess I am finally getting my piece of the bailout. My Citigroup shares about doubled in value over the weekend (all the way to 1/5 of what they were at the beginning of the year).

  10. And/or, I can hardly wait to bail out their greedy stupid asses with my prudently conserved assets.

    I guess technically the casino credit tightening indicates that the casino is trying to avoid getting stiffed during this economic climate but who knows, the casino industry might also be too big to fail. ;o) I mean look at all the restaurants, airlines, convention supply providers, taxi cab drivers, showgirls and housekeepers that depend on that industry. Surely the casino industry would qualify for a bailout but the joker that bet his last $20k of credit line to save his house still won’t get shit. (Not that he should.)

  11. I’m cool with this if Citi manages to “lose” my student loans.

  12. If someone bought their house in the last two years and is underwater, why should they continue to pay on their mortgage?

    Dude, people carry auto loans that are underwater all of the time and don’t think twice about it.

  13. as someone who has credit card debt, a mortgage, and a freaking 1999 Buick in the driveway (and is a frequent flier to boot), I continue to ask, Where’s My Bailout?:

    As a renter, who doesn’t drive, and has a zero balance on his credit cards, where’s MY goddamn bailout.

  14. You know, Citigroup had this guy – real smart guy – I think he wrote a book about risk – well anyway, he used to be secretary of the US of A treasury, …during the boom years – you know, when amazon was 400$ a share, and Pets.com, which consisted solely of a sock puppet was valued at billions…um, what was my point? O yeah, his name was Robert Rubin. And he worked for Citi and made a mint. Um, shareholders – not so much.

  15. I hope part of the money will pay for “SUCKERS” signs for the lawns of anyone keeping up their mortgage.

  16. So what’s your solution, Nick? To let Citigroup et al. go under? Frankly, capitalism is falling on its ass. We’re being fucked by the Invisible Hand!

  17. The hand we’re being fucked by is pretty visible from where I’m standing, A.V.

  18. I’d like to walk into one of these meetings, raise my hand, and say “Hey, I have an idea — how about we NOT bail out failing companies?”

    Well, I’d get some laughs, anyway.

  19. To let Citigroup et al. go under?

    Yes, yes, a thousand times yes!

    Citigroup, AIG, GM– there’s not one that doesn’t do anything a dozen other companies can’t, or that can’t be reorganized under bankruptcy. All we’re doing is keeping the least competent business managers going. This is exactly the opposite of what is supposed to happen in a recession.

  20. Mo,

    That’s because auto loans aren’t non-recourse like lots of home loans are. Default on your car loan and they get the car and cash from you. In non-recourse states, they get the house and nothing else regardless of how much it sells for.

    Hell, you could probably stop paying on your mortgage, save that money and then use it as part of a down payment for the same house. You’d get a hell of a break after the auction.

  21. My views on never investing in banks is paying off. Unfortunately, it seems to have cost me my dream of buying that condo in Florida I wanted!!!

  22. That sounds contradictory. Condos in Florida havn’t hit botton yet, but they are getting cheaper all the time.

    That’s what’s fucked up about the whole “crisis” mentality. If house prices collapse, more people can afford them.

    Economic downturns hurt some people, but they are opportunities for others.
    They are also wealth-equalizing. Given the amount of money lost in the financial sector, I expect inequality statistics to take a steep dive as a result.

    Another reason the bailout stinks. A big financial implosion is the best thing that could happen from the perspective of an egalitarian.

  23. If the bail-out works, won’t the next “boom” be built on a false foundation? That is a reason to not bail out; it can’t work.

Please to post comments

Comments are closed.