Monday, November 24, 2008

Citigroup collapses! Banking Shutdown Possible

Remember the article I posted earlier this month titled:

A Fictional Scenario of the Future: The Final Bailout by Martin D. Weiss, Ph.D. 11-17-08

I’d like to take this opportunity to ask Citigroup about its credit card and consumer loan portfolios. Is it true that, if you value them properly, the bank is, in effect, insolvent? And I’d like to ask JPMorgan a similar question: If you value your derivatives based on actual, current market conditions, is there truth to the view that Morgan is also de-facto insolvent?

Martin Weiss wrote a script of what he perceived would happen sometime in our future. Well, CLICK HERE to read Martin's Fictional Scenario and then CLICK HERE to read today's news and Martin Weiss's newsletter.

Citigroup collapses! Banking Shutdown Possible

It pains me deeply to announce that, despite the massive government rescue, yesterday’s collapse of Citigroup could ultimately lead to a shutdown of the global banking system.

For many years, I hoped this would never happen, and I thought we might be able to avoid it.

Indeed, that’s why, my firm, Weiss Research, first began rating the safety of the nation’s banks in the early 1980s, and why I later founded Weiss Ratings, a separate subsidiary dedicated exclusively to safety ratings — on thousands of banks, insurance companies, brokerage firms, mutual funds and stocks.

And now, here we are, nearing the end of the road with the largest banks of all endangered and with no larger bank that can swallow them up. It’s a day of reckoning that leaves me no choice but to issue this three-part warning:

Despite the U.S. government’s massive Citigroup bailout, it is going to be difficult for the global banking system to survive the shock to confidence for very long.

Even if insured depositors do not pull out their funds, uninsured institutional investors are likely to run with their money, threatening to bring the system down.
And alas, even if you have your money in a safe bank with full FDIC coverage, you could be adversely impacted.

Citigroup Gets U.S. Rescue From Losses, Cash Infusion (Update1)

By Bradley Keoun

Nov. 24 (Bloomberg) -- Citigroup Inc. received a U.S. government rescue package that shields the bank from losses on toxic assets and injects $20 billion of capital, bolstering the stock after its 60 percent plunge last week.

The second-biggest U.S. bank by assets surged as much as 72.4 percent in New York trading after the Treasury, Federal Reserve and Federal Deposit Insurance Corp. announced the aid plan in a joint statement. In return for the cash and guarantees, the government will get $27 billion of preferred shares paying an 8 percent dividend. FULL STORY.

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