WSJ reports that “people familiar with the matter” are suggesting Citigroup may need to raise as much as $10 billion in new capital:
“The bank, like many others, is negotiating with the Federal Reserve and may need less if regulators accept the bank’s arguments about its financial health, these people said. In a best-case scenario, Citigroup could wind up having a roughly $500 million cushion above what the government is requiring.”
What -that’s all? This report has been picked up by every major news supplier in the world. Just Google the terms “Citigroup may need $10B more capital” to see all the links… Swamp Report believes this is another intentional leak by the government to prepare the market for the stress test results. “In a best case scenario”… Ha! Citgroup’s wants us to believe they are fighting tooth and nail to keep from having to raise a lousy $10B. “Only please, please, please, Brer Fox, please don’t throw me into that briar patch.” The government’s approach seems to be reverse psychology: seed the idea that if $10B is all Citigroup needs then the CNBC cheerleaders are right – the banking problems are behind us. The government is really into manipulating by signaling. The AP dutifully reports and translates the government’s “signals”:
“Last week, Fed officials said all 19 banks that underwent the stress tests will need to keep extra capital on hand beyond what’s now required in case losses on loans and other assets continue to climb. That was a signal some banks would have to raise more cash. Initial results indicated that both Citigroup and Bank of America Corp. would be among that group, sources told The Associated Press earlier this week.”
Zero Hedge is a little impatient with the whole thing:
“Why should Chrysler creditors be forced to suffer and be scapegoated in front of the entire world, while we don’t know who one single large creditor of a Citi or of BofA is? …. but we can speculate…Hey Obama/Tim – how about some bank creditors suffer a loss here and there too in your witch hunt against “all those self-serving Wall Streeters.” Does it maybe have to do with the fact that these are not really Wall Streets at all but the very same gullible fools who are supposed to lap up the $1 trillion + in USTs you will be shovel feeding over the next year… yes, the same investors who still have their investment in Freddie and Fannie marked at par compliments of Uncle Sam and Joe Taxpayer. All is good though: CNBC just announced that all is priced in, and that no bad news can ever move the market lower as everything negative has been factored in every single stock price in perpetuity and then some.”
$10B is a pittance, agreed. But is it enough to cover Citigroups losses over the next 2 years? – not even a remote chance.
