November 25, 2020

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Revisiting Why The Shit Hit the Citibank Fan, Because It's About to Happen Again! Featured

NY Mag reports: Citigroup received the most federal funding during the financial crisis for a total of $476.2 billion in cash and guarantees. Next in line for a bailout was Bank of America with $336.1 billion. But between the billions in convenient funding and millions in settlements for failing to disclose risks and losses, the banks have definitely learned their lesson, right? Not according to the panel:

“Very large financial institutions may now rationally decide to take inflated risks because they expect that, if their gamble fails, taxpayers will bear the loss,” the report concluded. “Ironically, these inflated risks may create even greater systemic risk and increase the likelihood of future crises and bailouts. 

 The bank was bailed out in 2008. The article above was published in 2011.It is now 2020. Did Citibank (or for that matter Bank of America, or for that matter any other "Too big to fail" bank) learn their lesson? The answers are "Hell no!" for Citibank (see below), "Absolutely not!" for Bank of America and "Nah!" for JP Morgan and everyone.

Here's a quick four minutes that will walk you through whats going on in 2020. 

Methodology for scrubbing the misleading reporting of Citibank:

  • Step 1: Calculated the average Provision for credit losses quarterly during 2007-2009.
  • Step 2: Calculated the average of Total delinquency quarterly during 2007-2009.
  • Step 3: Calculated the average delinquency as a percentage of Provision for credit losses.
  • Step 4: Calculated the average Provision for credit losses in Q2 2020, using adjusted delinquency in Q2 2020, divided by the average delinquency as a percentage of Provision for credit losses during 2007-2009. 

 

  2007-2009 Q2 2020 - Reported Q2 2020 - Adjusted
Total Delinquency          23,115               2,761           22,853
Provision             7,470               3,885              7,301
Delinquencies as a percent of provisions 309% 71% 313%

 

 The results? Uh Oh! We've seen this movie before, haven't we? Just send this information viral, and remember where you heard it first. We want the credit!

There's a lot more to see in the upcoming weeks. Stay tuned!! See also: Analysis of JP Morgan's Horrible, Terrible, No Good 2nd Quarter and 

 

A list of Reggie Middleton calls from the past....

 Is this the Breaking of the Bear?Joe Lewis on the Bear Stearns buyoutBSC calls are almost free and the JP Morgan Deal is not signed in stoneThis is going to be an exciting, and scary morningAs I anticipated, Bear Stearns is not a done deal

  1. Correction, and further thoughts on the topic and How Far Will US Home Prices Drop?
  2. (not a single sell side analyst that we know of made mention of this very material point in the industry):Lennar, Voodoo Accounting & Other Things of Mystery and Myth!
  3. (2 months before Bear Stearns fell, while trading in the $100s and still had buy ratings and investment grade AA or better from the ratings agencies): Is this the Breaking of the Bear?|Joe Lewis on the Bear Stearns buyout Monday, March 17th, 2008:BSC calls are almost free and the JP Morgan Deal is not signed in stone Monday, March 17th, 2008 |This is going to be an exciting, and scary morning Monday, March 17th, 2008 | As I anticipated, Bear Stearns is not a done dealTuesday, March 18th, 2008 []

  4. :Is Lehman really a lemming in disguise?Thursday, February 21st, 2008 | Web chatter on Lehman Brothers Sunday, March 16th, 2008 (It would appear that Lehman’s hedges are paying off for them. The have the most CMBS and RMBS as a percent of tangible equity on the street following BSC. The question is, “”. I’m curious to see how the options on Lehman will be priced tomorrow. I really don’t have enough. Goes to show you how stingy I am.) |I just got this email on Lehman from my clearing desk Monday, March 17th, 2008| Lehman stock, rumors and anti-rumors that support the rumors  Friday, March 28th, 2008 | It appears that I should have dug deeper into Lehman! May 2008
    1. Will the commercial real estate market fall? Of course it will.
    2. Do you remember when I said Commercial Real Estate was sure to fall?
    3. The Commercial Real Estate Crash Cometh, and I know who is leading the way!
    4. Generally Negative Growth in General Growth Properties - GGP Part II
    5. General Growth Properties & the Commercial Real Estate Crash, pt III - The Story Gets Worse
    6. BoomBustBlog.com’s answer to GGP’s latest press releaseandAnother GGP update coming…(among over 700 pages of analysis, review the January 2008 archives or search for “GGP” for more research).
  5. Municipal bond market and the securitization crisis – part 2
  6. The collapse of the regional banks (32 of them, actually) in May 2008:As I see it, these 32 banks and thrifts are in deep doo-doo! as well as
  7. : “Can You Believe There Are Still Analysts Arguing How Undervalued Goldman Sachs Is? Those July 150 Puts Say Otherwise, Let’s Take a Look”,“When the Patina Fades… The Rise and Fall of Goldman Sachs???“andReggie Middleton vs Goldman Sachs, Round 2)
  8. (potentially soon to be the Global Sovereign Debt Crisis) starting in January of 2009 and explicit detail as of January 2010:The Pan-European Sovereign Debt Crisis
  9. I Suggest Those That Dislike Hearing “I Told You So” Divest from Western and Southern European Debt, It’ll Get Worse Before It Get’s Better!
  10. , May 2010: More on the Creatively Destructive Pace of Technology Innovation and the Paradigm Shift known as the Mobile Computing Wars»
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Last modified on Wednesday, 11 November 2020 07:45
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