http://business.timesonline.co.uk/tol/busi...icle2821077.ece
From The Times
November 7, 2007
Citigroup slips another 3% in spite of taking action on debt
Suzy Jagger in New York

Shares in Citigroup, the world’s biggest bank, slid another 3 per cent yesterday, despite the promotion of a veteran debt troubleshooter to draw a line under the group’s losses.

The value of Citigroup stock has fallen 8 per cent in two days after the Wall Street bank ousted Charles Prince, its chairman and chief executive, and said that it would have to write off between $8 billion (£3.8 billion) and $11 billion of bad debts.

Yesterday, the bank said it had promoted Richard Stuckey, part of its fixed-income team, to unravel the group’s sub-prime borrowings that would be all placed into one $43 billion pool. The day before the bank had appointed Robert Rubin, the former Treasury Secretary, as chairman.

Mr Stuckey has been credited with helping to sort out the remains of Long Term Capital Management, the hedge fund that was saved from going bust in 1998 after a $3 billion bailout by Wall Street’s biggest banks.

In an internal memo, Citigroup said that it would pool most of its sub-prime debt into one large portfolio that would be run by Mr Stuckey.

In total, the bank has about $55 billion of sub-prime debt, of which $43 billion is collateralised debt obligations (CDOs). That debt includes bonds backed by mortgages taken out by people with low incomes and bad credit histories. As America’s housing market slid into its worst recession in 16 years, the adjustable interest rates on a number of sub-prime mortgages rose sharply, forcing a swath of borrowers into arrears with their mortgages. The bonds issued on the back of those mortgages are now effectively worthless.

Mr Stuckey’s task is to manage the $43 billion portfolio by either selling the investments on without being forced to reduce their price even further, or retain them. The fund will be managed within the sub-prime portfolio group, of which Mr Stuckey will be the head. He begins his new role immediately.

Wall Street is scared that the market for sub-prime mortgage debt will deteriorate further and that Citigroup will have to write off more as the value of its assets sinks.

On Monday, as the bank admitted to new writedowns of up to $11 billion, it refused to rule out increased losses. In a call with analysts, Gary Crittenden, Citigroup’s chief financial officer, conceded that the bank did not hedge its sub-prime debt effectively before the credit markets froze up over the summer, when worries about soaring sub-prime mortgage defaults led investors to avoid the credit markets and banks to slash the value of their CDOs.

The bank said yesterday that it was trying to ring fence its existing sub-prime debt by “removing . . . them from the structured credit portfolios, and they will be managed separately from the remainder of our . . . business lines. Other structured credit and sub-prime positions – and any new future activity– will continue to be managed within existing . . . business lines.”

Roubini's good on this.

http://www.rgemonitor.com/blog/roubini/

I couldn't agreed more CGNAO.

The only difference is that ENRON had Arthur Anderson in their back pocket for many years signing off their off balance sheet activity.

No accountancy firm will be allowed to sign off these practices again. As Citi and Merrill (et al) approach year end they will find that they cannot hide their losses in SIV's. Their auditors will not let them do this. They may give them a bit of time to "rectify their errors' and this is what is happening now. This is why the write offs are accelerating. The speeding of the demise of the valuations of CDO's is being coupled with the realisation that this cannot be hidden anymore with the hope that the value of these will rise.

Did you know that Citi have only written off 20% of the value of the CDO's they are currently holding from 2006 and 2007. And this is only on the stuff they are holding, you know what the ABX charts look like, a long way to go before their write off's reflect the value being placed on them in the market. Look at how much more they have to write off.

Then think about how much they have "sold" to SIV's. Think about how much of that they will have to take back onto the balance sheet when the bean counters refuse to sign off the books (as they are doing now) and then write that off as well.

The big difference between ENRON and Citi is that Citi have no friends and nowhere to hide this mess.

It's funny how fraud never gets discovered on the way up only on the way down because that's when the questions get asked.

I've been interested in Arthur Anderson ever since discovering that they advised Brown about fiscal policy before Labour gained power in 1997.

I'm curious about what has happened to the "thinkers" previously employed by Arthur Anderson - have they all been forced to retire, or do some still work in accountancy/finance?

I find it difficult to believe that accountancy suddenly became squeeky-clean in the wake of Enron's collapse.

that Roubini article's on form...

it's amazing, all this sh!t going on, and the BBC are running a show on 1 about a font (helvetica, for the font geeks)

*looks up from the helvetica program*...

eh? wassup?

the outcome may end up the same but the circumstances are completely different - look up the harvard journal on what happened with enron - it really is an eye opener

i'm more of a 'century gothic' man... those li'l round O's. cute, as fonts go

Why don't they sell equal amounts of their toxic waste to each other at inflated prices to keep up appearances?

UK split cap funds kept their collective scam going for quite a while by buying each other's shares at fantasy prices. No-one was prosecuted.

Or is the SEC more effective than our FSA?

Cgnao

Have you seen the net traffic re. Leo Wanta, the VK Durham Trust, Citi, forged something or others in the Philipines and the imminent collapse of the FED??

Tin foil hat stuff, I'm sure, but the funny thing is that the turmoil predicted by all this does indeed seem to be coming to pass.

Do you have any comments (I'll understand if it's not your area (a polite way of saying beneath you ))

serious question - should I be getting my STR fund out of my egg (owned by CITI) savings a/c?

Definitely, and place it somewhere secure like Northern Rock...err, no...ummm, Barclays...err no...ummm.....

If I had an egg account, I must admit I would be looking for another home.

By the way, does anyone here know much about the Cooperative Bank and its state?

......some are possibly in Iraq....

QUOTE

'RichB' date='Oct 22 2007, 03:49 PM' post='818951']
Heh.

You know the accountants behind enron are now bought out, rebadged, and in Iraq defining and implementing their new tax regime...?

Seriously.

http://www.housepricecrash.co.uk/forum/ind...st&p=818951

Didn't they turn into accenture (or some snazzy name) and now advise the likes of BP?

No Accenture were Anderson Consulting (tax dodging advice etc) and Arthur Anderson were the bean counters. A bit like Ey and Gap Gem used to be the same.