Citi Scramble
More government messes and confusion as they try to save yet another failing financial entity. Obviously, they have no idea what they’re doing – again.
Citi officials are reportedly working on a plan that could include a capital injection from the Federal government—among other possible ideas. The details have yet to be hammered out and it’s not clear when such a plan would be announced.
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Update: The government is looking to buy a substantial amount of assets from Citi, similar to a good bank, bad bank structure. The government would absorb much of the losses for Citi if there are losses and Citi would issue preferred stock to the government. The deal is not finalized but could be announced tonight.
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Update 2: Sources with knowledge of the deal say government officials are now getting cold feet over the plan to buy the troubled assets from Citigroup.
Situation is still fluid and people close to the company say some sort of a deal will likely be worked out tonight. one other option being considered now is for the government to put money into Citigroup.
The problem with buying the assets from citi is political: people close to the deal know that other firms will line up and ask the government to purchase their troubled assets as well knowing that all brokerage stocks got crushed when treasury secretary hank paulson reversed his plan on the tarp to direct capital infusions to the banks and away from buying troubled assets.
Bottom line: this is very fluid and the situation may change again, but as of now government getting cold feet on plan to buy troubled assets, which leaves direct capital infusion on the table.
Yeesh.
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This is a mess. Methinks the car makers got in line too late. Someone is going to fail somewhere. Actually, they’ve all failed–it’s a matter of which ones enter bankruptcy and when.
Comment by Maria — 11/23/2008 @ 6:55 pm