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Crashing Citigroup Crony-Capitalists Fiddle While Main Street Burns

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seemslikeadream Donating Member (1000+ posts) Send PM | Profile | Ignore Wed Nov-28-07 04:33 PM
Original message
Crashing Citigroup Crony-Capitalists Fiddle While Main Street Burns

http://www.counterpunch.org/martens11272007.html
November 28, 2007

Crony-Capitalists Fiddle While Main Street Burns
Crashing Citigroup
By PAM MARTENS

The saga of how the top minds in Washington and on Wall Street have dealt with the deepening financial crisis in the U.S. would make a great Hollywood screenplay, except for this: it's absurdly unbelievable.

Storyline: The largest bank in the United States (by assets), Citigroup, is discovered to have stashed away over $80 Billion of Byzantine securities off its balance sheet in secretive Cayman Islands vehicles with an impenetrable curtain around them. Citigroup calls this black hole a Structured Investment Vehicle or SIV. Wall Street insiders call it a "sieve" that is linked to the breakdown in trading of debt instruments around the globe and the erosion of wealth in assets as diverse as stock prices to home values. Additionally, tens of billions of dollars in short term commercial paper backed by these and similar Alice in Wonderland assets are sitting in Mom and Pop money market funds at the largest financial institutions in America, with a AAA rating from our renown credit rating agencies.

Setting: Picture the Titanic shortly after it crashed into the iceberg. Imagine that its officers want to pretend to all its passengers and crew and investors that there is no serious damage because the giant floating Citi did not really hit an iceberg; it just hit a wall of worry. It will be able to right itself in no time at all as long as everyone remains calm. Even though the lavishly appointed ship is dangerously listing (stock price fading daily) it says it can stay afloat by an ingenious bailout plan. Everyone just needs to walk calmly to the dining room, collect a tea cup, and pitch in with the bailout.

This is effectively what the U.S. Treasury has anointed as a game plan: Citigroup, the gargantuan and troubled bank, will be bailed out by virtue of all of its smaller competitors chipping in some money to a SuperSIV, a kind of Big Daddy Black Hole whose details are apparently too scary to release to the public. These are the very same competitors who lost market share to Citigroup because Federal regulators allowed it to grow fat and sassy by playing dirty, including collecting massive fees for hiding debt for bankrupt Enron, WorldCom and Italian dairy giant, Parmalat.
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DemReadingDU Donating Member (1000+ posts) Send PM | Profile | Ignore Wed Nov-28-07 04:59 PM
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1. saved by Abu Dhabi
Abu Dhabi blazes trail as investors circle US banks

A $7.5bn Abu Dhabi deal to buy Citigroup shares may have created a model for acquisitions by Gulf and other emerging-market investors scouring the ruins of the U.S. mortgage crisis for bargains.

The Abu Dhabi Investment Authority (ADIA) sought no role in managing Citi, allowing the world's wealthiest sovereign fund to invest as a saviour of the largest US bank without the risk of being perceived in the United States as an Arab predator.

Investors from Dubai to China could be considering similar deals with cash-strapped US banks, hoping to ride a recovery in their stocks and avoid the political barriers that could have been thrust in their path in better times, analysts said.

"There will be more such investments," said Giyas Gokkent, head of research at the National Bank of Abu Dhabi. "The other buyers will likely play the same white-knight role," he said of other Gulf Arab investments in Wall Street firms.

more...
http://www.guardian.co.uk/business/2007/nov/27/3

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Prefer Donating Member (1000+ posts) Send PM | Profile | Ignore Wed Nov-28-07 05:05 PM
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2. What are byzantine securities?
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DemReadingDU Donating Member (1000+ posts) Send PM | Profile | Ignore Wed Nov-28-07 05:15 PM
Response to Reply #2
4. definition of byzantine

Definition:

1. very complex: extremely complex or intricate


2. devious: marked by deviousness or scheming


http://encarta.msn.com/dictionary_701704825/byzantine.h...



Maybe someone else has a better definition that applies directly to securites.
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Elspeth Donating Member (1000+ posts) Send PM | Profile | Ignore Wed Nov-28-07 05:11 PM
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3. Sorry to be so clueless but could someone explain
this all? I feel like I need "Market Crashes for Dummies". :(
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