rssCitigroup a ‘Black Hole’ that Requires Nationalization
Monday, February 23, 2009 at 9:02 am
- 6 Comments
A year ago, blogger Michael Shedlock pronounced Citigroup insolvent. No one paid much attention then, but Shedlock never wavered.
Now the U.S. government is in talks to significantly expand its ownership of Citi, the Wall Street Journal reports. And Shedlock, who writes the widely read Mish’s Global Economic Trend Analysis blog, thinks that move can’t come too soon.
From Shedlock:
Citigroup is a black hole, sucking in every dollar thrown at it and it still wants more. No amount seems enough to save it. Taxpayers have already guaranteed a whopping $300 billion dollars worth of Citigroup debt. Now, two months later, Citigroup is begging for still more capital, pretending that will save it.
And Treasury Secretary Timothy Geithner isn’t helping, Shedlock says:
Not only is Citigroup a black hole from which no taxpayer dollars can escape, but Geithner’s brain is a black hole from which no intelligent thought can escape.
How the hell can you preserve a system this way? The answer is you can’t. Nonetheless the Obama administration tries to end bank nationalization talk.
That isn’t working. Calls for nationalization keep growing, with everyone from Nobel Prize-winning economist Paul Krugman to former Federal Reserve Chairman Alan Greenspan joining the chorus. Shedlock points out that plenty of questions about nationalization remain, but there’s little doubt it’s the direction we’re headed in. There’s just no other choice. From Shedlock:
Geithner is attempting to bail out his banking buddies, no more, no less, and he does not give a damn what it costs taxpayers to do so. And while everyone and their brother has hopped on the Nationalization Train (please see The Nationalization Train Has Left The Station), I think there are at a bare minimum a half dozen questions that need to be addressed first (please see Nationalization Revisited).
Citigroup is struggling to remain independent even as it knows full well, that without still more government intervention, it is worthless. In fact, Citigroup is less than worthless because without more taxpayer cash infusions it cannot survive.
To hell with Citigroup. Bust it up and sell it. It’s the best possible outcome for everyone involved.
With banks facing stress tests this week that will reveal more about their bottom lines, look for nationalization in some form to become an accepted strategy. They’ll call it something else to make it more acceptable, like preprivatization. As Shedlock pointed out last year, the entire banking system is insolvent, not just Citigroup. It really doesn’t matter what they call it anymore. Nationalizing the banks may be the only thing left to do.
6 Comments
Comment posted February 23, 2009 @ 10:34 am
Are we doing a good thing for the economy by trying to stabilize companies that are headed out of business because of their entanglement with the market and the number of jobs of that stand to be lost?
Are we postponing the inevitable? What if these companies go out of business despite the fact that the government has given billions of dollars in an effort to keep the companies going out of business? Where will be then if the government loses billions and all the jobs the government were trying to save are gone any way?
http://www.weeklypoint.com/2009/02/23/us-may-in…
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Comment posted April 30, 2009 @ 6:24 pm
With all the problems, confusions, and wearies in the investment world and investing your moneyChoose your investment wisely, as there are some stocks that don't make for as good an investment as you might think. The Forbes list of those exact investments has come out, and the list isn't exactly a shocker. AIG, Citigroup, Fannie Mae, Freddie Mac, and GM are the stocks losing money at a frantic pace, and among them, GM is flirting with bankruptcy. This isn't a shocker, as every one of these megafirms is currently great troubled, and went crying to the government about how they lost all their money. Every firm on the list had to get a personal loan from the taxpayers. It's a subject of great speculation if we'll get a return on our investment.
Comment posted May 1, 2009 @ 1:24 am
With all the problems, confusions, and wearies in the investment world and investing your moneyChoose your investment wisely, as there are some stocks that don't make for as good an investment as you might think. The Forbes list of those exact investments has come out, and the list isn't exactly a shocker. AIG, Citigroup, Fannie Mae, Freddie Mac, and GM are the stocks losing money at a frantic pace, and among them, GM is flirting with bankruptcy. This isn't a shocker, as every one of these megafirms is currently great troubled, and went crying to the government about how they lost all their money. Every firm on the list had to get a personal loan from the taxpayers. It's a subject of great speculation if we'll get a return on our investment.
Comment posted July 6, 2009 @ 11:56 pm
Your recap of Shedlock's position is completely false. He absolutely and resolutely opposes nationalization, but points out that it is likely to happen anyway thanks to false economic pretenses by our political, academic, and media leaders. He names these questions knowing that the right answers are impossible for Geithner, Bernanke, and Krugman to honestly find if they wish to nationalize. Shedlock's position on nationalization is quoted above in his last sentence, but it seems you missed it.
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