This is probably true. I pesonally hate that rekless people get away with 100s of miilions making sharehodlers and government to pay for their mistakes, but should the government let Citi fail, the reprecussions will be more severe then anyone can imagine. Thus lesser eveil is always more preferable.
Citi could fail. For all we know their books may be in total disarray. Sometimes all the credit in the world can't salvage a company. I'm not saying it's likely, but it's more than a remote possibility. $6.5 billion writedown only days ago, now this. Maybe $20 billion next week. It's an extremely complex company; probably nobody knows what shape they're really in.
"I do not think you understand what I wrote. Money went someplace, it was not destroyed." - No, I don't think you understand. Yes the money is gone. No the money has not been "transferred" to someone else. When you have assets worth nothing you write them down off your books bc those assets have no value...there is nothing of value to transfer. What is there not to understand about this? An asset worth 99 cents on the dollar 12 months ago is now valued at 10 cents on the dollar...assuming you can even get a bid. These banks and wirehouses have exposure to these assets (2005-2006 subprime/alt-a/prime/arm/option arm/ etc etc)...that are significantly exceeding their capital. That's the concern here, why do you think the Fed is cutting rates?? The Fed is printing money (M3 14+% yoy) and lowering rates in a rising employment/strong GDP environment bc there are liquidity/solvency issues at some of this countries largest financial institutions that have allowed themselves to become overlevered in nonliquid assets. This is true for Europe too...rumors of Barclays going to the BOE for help..Northern Rock..etc.etc... This is a highly dangerous combination and the charade the banks have been playing (Level 3 assets) is slowly becoming clearer to market participants (hence the sell off in banks/brokers). Also, as an aside, I do hope people realize that when they say the government will not let an instutition fail....that means you and me are flipping the bill...I sure hope everyone understands that. Bc then maybe people will be less excited about the government coming to the rescue.
the us banks are virtually bankrupt. the investment banks are worse hit. some may survive but only due to mergers and federal intervention. they do not have any assets. same as monopoly. no assets. game over.