First came the black hole that is AIG, now the US government has taken on what may transpire to be the equally infinite liabilities of Citigroup. As of late last night, The Telegraph reports that the US government is giving it another $20bn injection, and guaranteeing $306bn (207bn) of Citigroup's problem mortgages and other nasty assets. In return for this generosity, Bloomberg points out that the US taxpayer will be granted $27bn of preferred shares paying an 8% dividend. However, the deal also involves a loss-sharing arrangement under which Citi assumes only the first $29bn in losses on its risky assets. The US taxpayer 'absorbs' 90% of the losses on anything above that. Needless to say, there are limits on executive compensation.
If the government's rescue plan is a success, it could help bring stability to the entire financial system. If it doesn't, even deeper doubts about the industry's future could spread. (Wall Street Journal).
If Citigroup doesn't bring its share price back above $5 before the end of the year, big mutual funds and other institutional investors will be forced to sell their entire holdings, as rules prohibit them from investing client funds in such cheap stocks. If such a forced sale occurs, Citi faces the probability of complete share price collapse. (Guardian).
Citigroup's relying on deferred tax assets to inflate its capital.
Citigroup says 'Don't Panic'. (Independent).
Citigroup's risk managers were too chummy with the business. (New York Times).
"All financials will be owned by the U.S. government in a year." (CNBC).
Universal banks are now suffering more than the old broker dealers. (Telegraph).
Job loss announcements have become a burden on the share price. (CNBC).
The question is: who gets Goldman? I reckon it could either be US Bancorp, which would run the show, or maybe Deutsche [Bank]. (The Times).
Barclays bankers will still get bonuses. (Telegraph).
RBS assembling a team of 500 'grey-haired bankers'. (Guardian).
MD loses 500k house deposit after options plunge and bonus prospects evaporate. (The Times).
Pay bankers carried interest. (Financial News).
33 expats an hour moving to the Arab states. (The Times).
Big cuts coming in Asia. (Finance Asia).
10,000 jobs insulating homes. (Guardian).
Links have gone up (a lot) earlier than usual today because the eFinancialCareers editorial team will be operating in a skeletal fashion from mid-morning due to international jet setting and minor surgical procedures. All will be back to normal from tomorrow.