With the stress test results coming out, it is a wonderful thing for Citigroup that it has been able to sell its Japanese brokerage unit to Sumitomo Mitsui, and at a good price of $7.8 billion.
Here’s an excerpt of the FT story:
Citigroup on Friday sold its Japanese brokerage and some parts of its local investment [...]

The leaks about who failed the stress tests are already starting.  Who got a big fat ‘F’?  Apparently, Citi and BofA for starters.  But is that any surprise?
Regulators have told Bank of America Corp. and Citigroup Inc. that the banks may need to raise more capital based on early results of the government’s so-called stress [...]

This comes from French-language Swiss daily Le Temps:
Over 50% of respondents in Geneva surveyed by the HEG School of Management believe that the bankruptcy of a large institution is likely.
The Swiss political world is clearly convinced that it will never let one of the major banks in the country go bankrupt. Despite the rescue of [...]

Here we are just days out from the announcement by Treasury Secretary Tim Geithner that the Obama Administration will be buying up so-called toxic assets as originally planned by Henry Paulson during the Bush Administration. The initial reaction has been one of euphoria as most asset markets responded positively to the news.

Now that the dust has settled somewhat, another reaction is taking place behind the scenes and it looks an awful lot like banks — specifically Citigroup and Bank of America — are gaming the system. Note my highlighting.

From Justin Fox of Time Magazine:
 
FDIC chairman Sheila Bair doesn’t think a full government takeover of Citigroup and other multinational financial institutions is practical or even possible. Here are her reasons, as summarized by Pete Davis:
1. The legal authority to take over large banks does not currently extend to multinational financial conglomerates;
2. The FDIC lacks the funding to conduct [...]

Beim was a Professor back when I was at Columbia, although I don’t remember being in any of classes. Before he was a Professor, he worked as an Investment Banker at First Boston and Dillon Read, two white shoe firms that are now defunct, absorbed into Credit Suisse and UBS.

Oppenheimer has a research note out today that calls Tim Geithner an “evil genius.” The genius moniker comes from the steady creep up the capital structure, giving Geithner access to huge pools of money as the Treasury dials for dollars. The evil part has everything to do with the pain this strategy is going to mete out to preferred shareholders and, eventually, bondholders

The big news other than GDP falling off a cliff is the confirmation that the Obama Administration is going to bail out Citigroup for a third time.  The market reaction this morning was quite negative, causing index futures to sell off even before the GDP number hit the tape.  Citigroup itself dropped as much as [...]

Citigroup is looking to raise capital and shed assets in order to deleverage and prevent a worst-case outcome for the financial institution. Case and point is the fact that the company is putting its Brazilian subsidiary Redecard on the block for sale. What remains unclear is whether Citi is making these moves just to stave off a worst-case outcome (i.e. bank failure). These sales certainly make the company easier to sell or nationalize.

This news is just in from the Wall Street Journal. Obviously, all of the activity we have seen with Citi’s foreign subsidiaries of late has been in preparation for sale or nationalization. I expect this to be the big news when markets open tomorrow. Note: this will mean massive dilution for shareholders, so [...]