Rebel Traders – Analysis Without The Hype

That is what the FBI is probing, although Citibank claims ‘all is well’.

The Federal Bureau of Investigation is probing a computer-security breach targeting Citigroup Inc. that resulted in a theft of tens of millions of dollars by computer hackers who appear linked to a Russian cyber gang, according to government officials.

The attack took aim at Citigroup’s Citibank subsidiary, which includes its North American retail bank and other businesses. It couldn’t be learned whether the thieves gained access to Citibank’s systems directly or through third parties.[...]

[...]The Citibank attack was detected over the summer, but investigators are looking into the possibility the attack may have occurred months or even a year earlier. The FBI and the National Security Agency, along with the Department of Homeland Security and Citigroup, swapped information to counter the attack, according to a person familiar with the case. Press offices of the federal agencies declined to comment.[...]

[...]Joe Petro, managing director of Citigroup’s Security and Investigative services  “I’m not aware of any major case the FBI is working in our company at this magnitude.”[...]

[...]Security officials worry that, beyond stealing money, hackers could try to manipulate or destroy data, wreaking havoc on the banking system. When intruders get into one bank, officials say, they may be able to blaze a trail into others.[...] (Source: WSJ)

Interesting, the FBI and Citibank were swapping information to counter the attack, yet CitiBank says no attack took place. I guess it would not look good if the nations worst bank, which is being propped up by the tax payers was hacked and money was stolen. So just sweep it under the rug CitiBank, like you do with all your other losses.

I wonder, if CitiBank was hacked and money was stolen, would they value the losses at mark to market? Sarcasm intended

During this entire economic crisis I have seen many stupid and/or irresponsible actions taken by the banks and investment firms. But this one from CitiBank is so stupid and irresponsible that it leaves me astonished that anyone that is a customer is willing to sit back and take this.

If you are a CitiBank credit card customer you are already well aware of your interest rates going up significantly, or you have had CitiBank cut your credit limits, and in some cases had your account held for ransom by telling you to pay the 29.99% interest rate or they will cancel your card altogether leaving you ’stranded for credit’.

CitiBank has repeatly abused and taken advantage of its customers. Now what I am about to tell you amounts to CitiBank holding a gun to your face and robbing you.

CitiBank says that they will soon be offering ‘rebates’ that will help offset some of the interest rate hikes. But how does one get this ‘rebate’? You have to spend more money by charging more purchases to your CitiBank credit card.

From the Associated Press:

For Citibank credit card holders, there is one way to escape the bank’s rate hikes currently under way: Meet a monthly spending requirement.

Those who meet the spending minimum — in some cases $750 a month — will be able to get a rebate on their total interest charges for that month. The rebate could cover some or all of the interest rate hike. Customers also need to make payments on time to qualify for the rebate.[...]

The change by Citi comes as the industry rushes to adjust to sweeping reforms to start in February that will limit when and how much card issuers can hike interest rates. In a statement, Citi said the actions were necessary given elevated losses from souring loans and “regulatory changes that eliminate repricing for that risk.” [...]

[...] Citi’s move is just the latest in a series of rate hikes, lowered limits and other term changes credit card customers have seen in the past year. [...]

So if you spend at least $750.00 per month then you can get a rebate applied to your account of some amount to help offset the costs of the higher interest rates and higher fees. On the surface that may sound wonderful (if you are naive). But what you are really doing is putting yourself further into debt with the illusion of having a lower interest rate.

What CitiBank is doing is no different than a drug dealer who threatens his junkie by telling him that he can get his drugs cheaper if he buys even more.

If you are still a customer of CitiBank after all they have done to you so far and have taken your tax dollars (tens of billions worth in bailouts), then I must tell you that you need to WAKE UP!

Face the facts people. CitiBank is still in financial trouble, otherwise they would have not needed billions of dollars in financial aid (tax payer money). They got themselves into the mess they are faced with and are forcing YOU to bail them out.

Tell them you have had enough. Cancel your checking account, cancel your credit card, eliminate any business ties with CitiBank. Don’t let them take advantage of you any longer.

CitiBank through its own devices dug its own grave, now they want YOU to be the one that occupies it. It is way past the time for this zombie bank to occupy its own grave.

Citigroup is asking the U.S. Treasury for permission to pay employees bonuses in order to make up for their stock losses.

You know I can’t help but feel that these companies are living in a world completely disconnected from all rational reality. This ‘please, may we’ request comes just hours after the Wall Street Journal reported that Citigroup [Citibank] may be one of the banks that will need additional funding, perhaps even more tax payer money if it can’t raise the capital on its own.

Citigroup Inc., soon to be one-third owned by the U.S. government, is asking the Treasury for permission to pay special bonuses to many employees, according to people familiar with the matter.[...]

[...]Citigroup is trying to get U.S. approval for special bonuses for many employees in the rest of the company. In a meeting earlier this month with Treasury Secretary Timothy Geithner, Citigroup Chief Executive Vikram Pandit made the case for the stock-based bonuses. Executives are describing the bonuses as “retention” awards designed to perk up demoralized employees who the company worries are vulnerable to poaching by rival firms, people familiar with the matter said.[...]

[...]Citigroup has already gotten its own share of criticism for excessive spending, thanks in part to its aborted plans earlier this year to buy a new corporate jet. The company has received $50 billion in taxpayer aid, and the U.S. government is protecting Citigroup against most losses on $301 billion of its assets. The Treasury is poised next month to become Citigroup’s largest shareholder, owning as much as 36% of its common stock.[...]

[...]Citigroup executives say they are worried that employees, who have seen much of their past bonuses, paid largely in stock, wiped out by the collapse of Citigroup’s share price, will jump to banks that aren’t tethered by federal pay restrictions. Those fears have intensified as healthier rivals such as Goldman Sachs Group Inc. rush to pay back their taxpayer investments.[...]

[...]Citigroup’s stock price has lost about 95% of its value since peaking around $55 in May 2007. That has taken a severe toll on the fortunes of employees, who hold a total of about 245 million stock options, warrants and rights to buy shares, with a weighted average exercise price of $41.84, according to Citigroup’s latest proxy statement. With the stock below $3 a share, most of those awards are essentially worthless.[...]

Source: WSJ

Hey Vikram Pandit.. what about all of the ‘other‘ share holders who you left holding the bag, going to make up for their losses too?

Cry me a freaking river…

From the ‘duh’ file:

Regulators have told Bank of America Corp. and Citigroup Inc. that the banks may need to raise more capital based on early results of the government’s so-called stress tests of lenders, according to people familiar with the situation.

The capital shortfall amounts to billions of dollars at Bank of America, based in Charlotte, N.C., people familiar with the bank said.[...]

Industry analysts and investors predict that some regional banks, especially those with big portfolios of commercial real-estate loans, likely fared poorly on the stress tests. Analysts consider Regions Financial Corp., Fifth Third Bancorp and Wells Fargo & Co. to be among the leading contenders for more capital. Wells Fargo declined to comment. Representatives of Regions and Fifth Third didn’t respond to requests for comment made late in the day.

Government officials say their meetings about the stress tests with bank executives over the past few days conveyed preliminary results and that discussions were expected to continue this week about specific findings. They also say that banks directed to raise more capital shouldn’t be viewed as insolvent.[...]

Banks that are deemed to need more capital will have six months to find it, either from private investors, other financial institutions or the U.S. government.

Bank of America and Citigroup have required a total of $95 billion in taxpayer infusions, and the government has agreed to protect the banks against most losses on hundreds of billions of dollars worth of assets.[...]

Source: WSJ

From the “you have got to be kidding me file“…

The WSJ Reports:

Citigroup’s chief economist is leaving the company for a job at the Treasury Department, according to an internal Citigroup memo.

Lewis Alexander, who has been at Citigroup since 1999 and before that worked at the Federal Reserve, will head to the Treasury “to work on domestic financial issues,” said the Citigroup memo, which was sent Tuesday.

According to a government official, Mr. Alexander will be a counselor to Treasury Secretary Timothy Geithner. Mr. Alexander and a Treasury spokesman weren’t available to comment Tuesday. A Citigroup spokesman declined to elaborate on the company’s memo.

Mr. Alexander, who was the Commerce Department’s chief economist from 1993 through 1996, is joining the Treasury at a time when the department is scrambling to beef up its ranks of senior officials. The staff shortage has fostered doubts on Wall Street and in Washington about the Obama administration’s ability to get its arms around the financial crisis.

The Obama administration so far has largely avoided tapping Wall Street officials for senior spots at the Treasury, wary of stoking the mounting political backlash surrounding the federal bailouts of the finance industry. That has irked top executives at some banks, who say they can’t get an audience with top Treasury officials.

Mr. Alexander’s role as Citigroup’s chief economist didn’t entail significant management responsibilities. But his optimistic economic forecasts colored executives’ views that the U.S. was unlikely to face a prolonged slump.

“I think that’s not going to spill over more broadly into the economy, and so I think we’re going to have a normal kind of housing cycle that’s going to last through the middle of this year,” Mr. Alexander said in a 2007 interview on PBS.

In the past five quarters, Citigroup has booked a total of more than $37 billion in net losses, largely stemming from the company’s overexposure to the U.S. real-estate sector. In a memo last week, Citigroup Chief Executive Vikram Pandit said the company was profitable in the first two months of 2009.

(emphasis added)

The economist who advised Citigroup throughout the entire housing bubble and the credit crisis will now be an adviser to Tim Geithner. And this man was unable to see the freight train coming right at him and his company. This can’t end well.

It was announced (officially that is) that Citigroup will form a joint venture with Morgan Stanley whereas the brokerage units are concerned. Morgan Stanley will pay Citigroup $2.7 Billion for the Smith Barney brokerage and will have a 51% controlling stake in the combined brokerage.

Citigroup Inc Confirms brokerage joint venture with Morgan Stanley; Citi to receive an upfront payment of $2.7B and at closing Citi will recognize a pre-tax gain of about $9.5B ($5.8B after tax); For Citi, the jv will create about $6.5B of tangible common equity. The new entity will be called ‘Morgan Stanley Smith Barney’. The deal is expected to close in Q3

Following the official announcement of the joint venture came news that Citigroup will also undergo a significant restructuring. The reports on the wires is that Citigroup will concentrate on two main business operations; wholesale banking for large corporate clients, and retail banking for ’selected’ markets around the world.

Also on the wires…

[...]As part of the new plan, Citigroup executives are considering the possibility of creating what is known as a “good bank-bad bank” structure, these people said. Under that structure, Citigroup would create a new corporate entity to house what it regards as its core businesses.

The “bad bank” would hold around $700 billion in assets, with the remaining $1.1 trillion considered core. The entity would face accounting-related complications, and Citigroup hasn’t settled on the approach, people familiar with the discussions said.

(read more…)

New York Post broke this story this morning:

Morgan Stanley and Citigroup are looking at setting aside between $2 billion and $3 billion to keep top brokers at the wealth-management shop the two banking giants are close to combining, The Post has learned.

The whopping payout would be distributed over time as retention bonuses for top-tier brokers that Morgan Stanley and Citi hope to keep as they look to merge their brokerage operations into a 22,000-strong behemoth.

[...]Morgan Stanley is expected to shell out as much as $3 billion to buy a 51 percent stake in the combination, which would be run as a joint venture led by Morgan Stanley Co-President James Gorman as chairman. The merged entity would comprise Citi’s crown jewel Smith Barney and Morgan Stanley’s former Dean Witter wealth-management franchise.[...]

[...]The planned retention bonuses would be paid out over a nine-year period. The bulk of the loot would go to brokers at Smith Barney, whose roughly 19,000-person army is expected to account for the lion’s share of the combined entity, said a person familiar with the situation.[...]

(read more…)