Rebel Traders – Analysis Without The Hype

Robert Rubin, you remember him. The once chairman of Citigroup, once Treasury Secretary under Clinton, and even once Goldman Sachs chairman. Well Robert Rubin has opened his mouth at a gathering in New York and said …

“virtually nobody” — himself included — foresaw the financial meltdown. (source: HuffPo)

He was the Treasury Secretary who in 1999 had a hand in the abolishment of the Glass-Steagall act. The very law that, if left intact to this day, would have lessened (if not outright prevented) the financial meltdown experienced over the past nearly three years now. Robert Rubin was even suspected of asking for the rating agencies to go easy on Enron because Citigroup stood to lose big if Enron’s ratings were downgraded.

We all know how Enron ended up.

So Mr.Rubin thinks that virtually nobody foresaw the financial meltdown. Wow! That is a bold statement there Robert. You do need to get out more often, or at least read a few editorials (and blogs) from time to time. There were plenty of people waving warning flags before the proverbial brown stuff hit the fan. While serving on the Board at Citigroup you were in part responsible for ensuring the banks practices would not harm the company, or its shareholders. That did not work out too well either, did it Bob.

Robert Rubin stands as a model of arrogance, greed, and a bloated view of self worth. You stood at every intersection in time when you could have stopped the chain of events that led to the pile up on the interstate. Instead, you simply turned a blind eye and was the voice of deregulating the financial system. It’s as if you pulled the plug on the traffic signals thinking that highways don’t need to be regulated by those red and green lights any longer. In real life that would cause disastrous accidents. In the financial world it created what we have today.

Robert Rubin, open your eyes, just once, and look around at what your deregulation band wagon has created.

Some of the major banks issued their monthly ‘master trust’ data yesterday. This data reveals the the amount of money that is delinquent, and the amount being charged off. It is still a mind boggling amount of money that is delinquent. Consumers are fine? I don’t think so.

Citigroup Inc Reports Dec Master Trust; Net Charge offs 9.56% v 10.29% m/m

- 5-34 days $2.5B v $2.49B m/m
- 35-64 days $1.17B v $1.22B m/m
- 65-94 days $972M v $979.8M m/m
- 95-124 days $869M v $872.7M m/m

American Express Co Reports Dec Master Trust; Net write offs on managed basis 7.1% v 7.6% m/m

- Annualized default rate net of recoveries 6.9% v 7.5% m/m
- 30 days past due loans on owned basis 3.7% v 3.9% m/m
- 30 days past due loans on managed basis 3.7% v 3.9% m/m

JPMorgan Chase and Co Reports Dec Master Trust; Net charge offs 7.11% v 8.81% m/m

- Delinquencies 4.94% v 4.90% m/m
- 30-59 days 1.13% v 1.23% m/m
- 60-89 days 0.99% v 1.12% m/m
- 90+ days 2.82% v 2.55% m/m

Bank of America Corp Reports Dec Master Trust; Net Charge offs 13.53% v 13.00% m/m

- Delinquencies 7.44% v 7.69% m/m
- 30-59 days $1.62B v $1.78B m/m
- 60-89 days $1.44B v $1.48B m/m
- 90-119 days $1.25B v $1.33B m/m
- Total delinquencies $6.72B v $6.93B m/m

Discover Financial Services Reports Dec Master Trust: Net charge offs 8.68% v 8.98% m/m

- Delinquencies 5.49% v 5.68% m/m
- 30-59 days $529.7M v $545.6M m/m
- 60-89 days $432.6M v $456.8M m/m
- 90-119 days $401.3M v $402.9M m/m
- Total delinquency amount ending balance $2.08B v $2.09B m/m
- Gross charge offs 9.64% v 9.91% m/m

Capital One Financial Corp Reports Dec Master Trust; Net Charge Offs 10.14% v 9.6% in Nov m/m – filing

- US Card 30 day+ delinquency rate: 5.78% v 5.87% m/m
- International Net charge off rate: 9.58% v 9.50% m/m
- Auto finance metrics annualized net charge off rate: 5.68% v 3.67% m/m
- US Card managed receivables $60.3B v $60B m/m

Citigroup (Citibank) gets special tax break from the IRS in a deal that allows Citigroup to forgo certain tax obligations saving the financial firm $38 billion.

The federal government quietly agreed to forgo billions of dollars in potential tax payments from Citigroup as part of the deal announced this week to wean the company from the massive taxpayer bailout that helped it survive the financial crisis.

The Internal Revenue Service on Friday issued an exception to long-standing tax rules for the benefit of Citigroup and a few other companies partially owned by the government. As a result, Citigroup will be allowed to retain billions of dollars worth of tax breaks that otherwise would decline in value when the government sells its stake to private investors.

While the Obama administration has said taxpayers are likely to profit from the sale of the Citigroup shares, accounting experts said the lost tax revenue could easily outstrip those profits.[...] (Source: Washington Post)

This is absolutely insane at all levels. The Government makes a huge deal about financial firms paying back the TARP funds, saying how great it is and that it shows the economy is returning to health.

But behind closed doors they slide them tax breaks that will likely cost us (tax payers) more in the long run. Citigroup dilutes existing shareholders by issuing new shares to help raise the cash needed for the TARP payback, and then the Government allows them to essentially skip town on $38 billion in taxes. This is not healthy operations, it is a sophisticated shell game and it is us, the tax payers, who are under the shell being moved around.

Can a ‘for profit’ corporation enjoy healthy revenues year after year and exhibit good morals at the same time? The largest companies in the nation have evolved over the years to find more ways to streamline operations, reduce waste, increase the productivity of their employees, preached corporate ethics to their employees, try to be involved with local communities by giving to the local youth clubs or donations to a regional cancer research center. But is this to be a good citizen of the community, or is it a show?

Corporations have moved further and further away from encouraging independent thought of their employees to one of ‘corporate thought’. Six Sigma programs have swept across corporate America like wildfire. Employees are being driven to compete against one another, strive to be their absolute best, and to achieve the Six Sigma black belt. Corporations scour the college campuses looking for future managers and leaders. They hire graduates right as they hang up their cap and gown and indoctrinate them into ‘their’ corporate mentality. To begin the brain washing as early as possible before they can discover the concept of free thought.

Ethics, as defined in the dictionary:

1. the body of moral principles or values governing or distinctive of a particular culture or group: the Christian ethic; the tribal ethic of the Zuni.

2. a complex of moral precepts held or rules of conduct followed by an individual: a personal ethic.

Corporations preach loudly that they embrace a corporate ethics policy. Employees in some companies are required to attend mandatory ethics training. And some companies even require the employees to sign a statement that they understand and will follow the corporate ethics policy. The purpose of an ethics policy is to tell the employees what is right and wrong. Don’t cheat, be honest with the customers, don’t commit fraud, treat all people equally, don’t exchange money from the Government and/or subcontractors in return for preferred treatment. The list goes on and on.

But what really is all of this ethics stuff? As defined in the Websters definition shown above, it is a “body of moral principles“. My question however is whose moral principals? A corporate defined morality, or a standard of morals that is generally accepted by everyday people who work hard and raise a family?

(read more…)

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.

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… and Bernie Madoff was a caring and honest man.

The Dow Industrial average reached 10,000 with CNBC staff wearing caps that read ‘DOW 10,000‘ and will run a “special” DOW 10,000 TV show this evening.

STOP THE INSANITY

The economy has not been saved, only disguised… akin to putting lipstick on ENRON years ago and calling it a great investment.

Banks and other financial institutions have only been able to report revenues because they no longer have to record ‘actual‘ losses, as long as they don’t sell it they can put whatever value on it they want. We have Congress and the FASB for that brilliant move.

Is Jamie Dimon (JP Morgan CEO) on ‘your‘ side?

Wednesday, October 14, 2009 9:38:07 AM

JPMorgan Chase and Co CEO Dimon: Consumer Protection Agency will be “damaging”; will cost customers.

Wednesday, October 14, 2009 9:38:07 AM

JPMorgan Chase and Co CEO Dimon:   Corporate lending continues to trend around all time lows, extended credit lines continue to be drawn at very light levels.

I guess CNBC ‘forgot’ to mention the bad parts

Don’t worry, President Obama has everything under control and will quickly move to solve this problem:

Wednesday, October 14, 2009 3:49:13 PM

White House: Pres Obama supports a $250 payment to seniors, veterans, and the disabled; program could cost up to $13B

- payment may include approx 57M individuals

Opps! There goes another one…

Red Roof Inn Inc., a hotel chain popular with business travelers on a budget, defaulted on $367 million face amount of mortgage debt, the latest hotel casualty in an industry that has been hard hit by the recession.

The defaults were reported by credit-rating company Realpoint LLC based on reports by the mortgages’ servicing company. Red Roof confirmed the defaults Tuesday.[...]

“As a result of the extraordinary stress in the hospitality industry and the economy overall, we have entered into some restructuring discussions with our lenders,” said Andrew Alexander, an executive vice president of Red Roof. “It has had no effect on our company operations or our franchise operations.”

[...]The debt on Red Roof’s properties is multilayered and complicated, hinting that Citigroup and the now-defunct Bear Stearns hadn’t finished securitizing some of it when the market for commercial mortgage backed securities, or CMBS, shut down in the summer of 2008, according to CMBS analysts. A Citigroup representative declined to comment. At least $367 million of Red Roof’s debt is in securitized mortgages. Another $655 million is in mortgages not securitized, and $164 million is mezzanine debt.

Extended Stay Inc., which operates roughly 680 hotels catering to budget-minded travelers on long trips, filed for Chapter 11 bankruptcy protection on June 15. Of Extended Stay’s $7.4 billion in debt, $4.1 billion is a securitized mortgage.[...]

[...]In 2007, Red Roof was acquired from Accor SA for $1.3 billion by a group led by Citigroup Inc.’s Global Special Situations Unit and including hotel manager Westmont Hospitality Group[...] Source: WSJ

“Acquired by Citigroup“… LOL. Citigroup is still the worst financial institution in my opinion. They are still living off the public teet and today we learn they are going to raise the salaries by 50% for their employees. Must be nice to be able to legally feed off the public. Where are your morals Citigroup? Oh, your a bank, there are none.

At 6am EST the S&P 500 E-mini futures pinned the January blow off top (see chart below).

Today we have General Motors officially announcing (and court filing) bankruptcy. President Obama expected to speak to the nation at approximately 11:45am EST. To be followed by GM statements shortly thereafter.

GM is being removed from the Dow Jones Industrial Average and will be replaced by Cicco (CSCO).

Another change to the Dow index is Citigroup is being dumped from the index and will be replaced by Travelers Insurance (TRV)

S&P 500 E-Mini Futures Chart

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…

The ‘big’ banks continue to “stick it” to the tax payers of this nation. Today the CEO’s of the biggest banks met with President Obama to discuss the nations banking crisis.

Following the meeting, each CEO made a statement and of course all the statements were the usual bright and cheery ‘constructive, good dialog, or ‘administration doing good job’. OF particular note was a statement by Ken Lewis, Bank of America CEO. He said that…

[...]“We recognize the Golden Age of bank compensation is over”[...]

But, just two hours later Bloomberg broke the story that Bank of America plans to issue pay raises to some of its investment bankers’ salaries by 70% (that’s right, seventy percent).

March 27 (Bloomberg) — Bank of America Corp. plans to increase some investment bankers’ salaries by as much as 70 percent following the takeover earlier this year of Merrill Lynch & Co., people familiar with the proposal said.

Bank of America, which has received $45 billion of taxpayers’ money, may raise the annual base pay for some managing directors to about $300,000 from $180,000, said the people, who declined to be identified because the final numbers are still under discussion. Salaries for less-senior directors would climb to about $250,000 from $150,000, and vice presidents would get $200,000, up from about $125,000, the people said.[...]

[...]The adjustments, which may be rolled out as soon as next month, are designed in part to align the salaries of employees at Charlotte, North Carolina-based Bank of America with workers at New York-based Merrill, one person familiar with the plans said. Salaries for traders and other employees outside the investment bank may also be adjusted, the person said.[...]

So with the outrage over bonuses the banks now will avoid the bonus terminology and instead substantially raise salaries.

[...]The worst financial crisis since the 1930s has spread across the economy, lifting the U.S. unemployment rate to 8.1 percent, the highest in more than 25 years, and causing the biggest quarterly economic contraction since 1982.

“We’re in an economic downturn, the government is pouring billions into banks, and these guys are boosting their salaries,” said Jason Kennedy, chief executive officer of London-based recruitment firm Kennedy Associates. “There’s an issue of public perception.”[...] [rebeltraders note: This is an issue of public responsibility and ethics]

And what is even worse? Citigroup and Bank of America appear to be working on a plan that will leave tax payers with an even bigger bill on our hands, and more money in their coffers.

From the NY Post:

As Treasury Secretary Tim Geithner orchestrated a plan to help the nation’s largest banks purge themselves of toxic mortgage assets, Citigroup and Bank of America have been aggressively scooping up those same securities in the secondary market, sources told The Post.[...]

[...]But the banks’ purchase of so-called AAA-rated mortgage-backed securities, including some that use alt-A and option ARM as collateral, is raising eyebrows among even the most seasoned traders. Alt-A and option ARM loans have widely been seen as the next mortgage type to see increases in defaults.

One Wall Street trader told The Post that what’s been most puzzling about the purchases is how aggressive both banks have been in their buying, sometimes paying higher prices than competing bidders are willing to pay.[...]

Now lets explain this. The largest banks have [combined] $trillions of toxic garbage on their books. And it is these very same toxic assets that the banks ‘claim’ they can’t sell because there is no market for them. And this is why the Government is establishing the toxic asset purchase plan which will use more tax payer funds to encourage other firms to start buying these toxic time bombs.

So if the banks are complaining that they can’t get rid of this junk then why are Citigroup and Bank of America out in the field scooping up even more of the very same toxic garbage? Because under the new Government plan it is likely that these companies will simply unload them into the tax payer funded program at a higher price, leaving us with the bill.

The banks get a quick buck by purchasing more toxic garbage at roughly 25 to 40 cents on the dollar, and under the Geithner plan will be able to unload them at a higher cost, all courtesy of the taxpayer.

These financial institutions are going to ‘game the system‘ in any fashion they can, plunging the tax payer debt further into a black hole.

Are there ‘any’ ethical bank CEO’s left? I have to wonder. Vikram Pandit (Citigroup CEO) and Ken Lewis (Bank of America CEO) are monuments of hypocrisy.

Hey Vik and Ken… as a tax payer I have only one word for you: RESIGN

The financial crisis in America is really a moral crisis, caused by the series of proofs . that the leading financiers who control banks, trust companies and industrial corporations are often imprudent, and not seldom dishonest. They have mismanaged funds and used them freely for speculative purposes. Hence the alarm of depositors and a general collapse of credit.”– The Economist, November 2, 1907

The CEO’s of Citgroup, Bank of America, and JP Morgan have all chimed in on the recent action to curtail bonuses at companies that are operating with tax payer funds.

Vikram Pandit, Citigroup CEO

Vikram Pandit (CEO, Citigroup) and Ken Lewis (CEO, Bank of America) issued memos to their employees today stating that the recent bill passed by Congress will make it hard for them to ‘retain their talent‘.

I am very tired of hearing about bonuses being needed in order to retain their employees. The CEO’s of these institutions are living in a world that is far removed

Ken Lewis, Bank of America CEO

from ‘Main Street USA’. They continue to operate with funding provided by the U.S. tax payers, they have contributed to the mess this nation is now in, and yet they continue to feel they are worthy of outrageous bonuses.

Under normal circumstances these CEO’s and their employees are free to make as much money as they want. But, when they are responsible for contributing to the financial chaos we are now facing and they require tax payer money in order to keep alive then there is a ‘line in the sand’ that must be respected. And these CEO’s and financial institutions keep crossing the ‘ethical’ line in the sand.

Vikram Pandit writes in his employee memo:

[...]The work we have all done to try to stabilize the financial system and to get this economy moving again would be significantly set back if we lose our talented people because Congress imposes a special tax on financial services employees.[...]

Ken Lewis writes:

[...]I am concerned about our ability to retain some of out most valuable employees. None of you (employees) deserve to have even more compensation taken away[...]

Cry me a river… if the employees don’t like the base salary they receive, which is already very healthy, then let them walk. Let them stand in line with their fellow Americans at the unemployment lines who they helped to put there in the first place.

Jamie Dimon, JPMorgan CEO

Jamie Dimon CEO, JP Morgan reassured his top 200 staff members that he “was actively engaging Washington on the matter“. Hey there Jamie.. must be nice to have friends in such high places of the Government that allow you to ‘actively engage’ them for your benefit. Ask the Americans on the unemployment lines how they feel about your bonuses.

The arrogance of these CEO’s is beyond any form of measurement. If these companies cannot operate without tax payer funds being injected into them then the only answer is for them to be left to their own devices. And if that means failure then so be it.

Reports circulating this morning are that Citigroup (C) and Bank of America (BAC) may soon be removed from the Dow Jones Industrial Average. This is no confirmation of this at this time. But, it is being widely discussed and the move, if true, could come very soon.