http://www.counterpunch.org/martens11272007.htmlNovember 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.