Citi...Bear...Snake...Rat

Oh Citi...

My favorite Government Sponsored Entity,
Indeed you are the Queen of Double Indemnity

In the newest edition of Mortgage Banking Magazine, the ill fated tale of Citi's handling of the Bear Stears Hedge Fund implosion is told in detail.

While Eddie's post from this morning deals with the scapegoats of the mortgage crisis, mine deals with those who escaped. I can completely understand if you guys are tired of hearing that investment bankers suck and that Wall Street is the devil's den. After all, you guys (for the most part) are not the generation that caused this shit propelling tornado. You are just going to be the generation that pays for it.

Many days I wake up and consider dedicating this blog to the mortgage mess alone. Then again, I am worn out, as well. I want to think happy thoughts, I want to go back to how things were before...but this nagging conscience of mine, just will not allow it.

I never took a liar loan or sold a slice of Z-Tranche pie, but like many of you I defended the system. I stuck up for Wall Street when the populist idiots threw rocks at the throne. I reasoned that grab happy buyers were at fault; victims of their own stupidity. I pointed my finger at the government; Fannie and Freddie my scapegoats du jour. I spat on Bush, hocked loogeys at Paulson and projectile vomited at Obama. I haven't changed my mind about these people and organizations, but now realize that I was too lenient on the banks. In this particular case, it is Citi and their eternal avoidance of just desserts. In the vein of a career criminal who turns government witness, this house of cards, theft and who me? arrogance still stands on tax payer stilts and on the backs of its victims.

Here's an excerpt from the article featuring the analysis of Janet Tavakoli, President of Tavakoli Structured Finance:

The [FCIC's Phil Angelides] should have asked the Citi executives "why the Bear Stearns [hedge fund] implosion didn't give [Citigroup] cause for alarm" in the spring and early summer of 2007. "Instead, [Angelides] gave them a free pass and let them get away with saying nobody could have known there were problems in 2007 until the fall"
Bear Stearns was planning an initial public offering (IPO) for Everquest Financial Ltd., which was jointly managed and advised by Bear Stearns Asset Management Inc. and Stone Towers Debt Advisers LLC. The privately-held fund owned $743 million in CDO assets, including 90 percent of the equity interest in those CDOs, according to the S-1 filing of May 9, 2007. The equity tranche is generally the riskiest slice of the CDO. Everquest owned pieces of 19 CDOs, while its subsidiary, the Parapet CDO, which was a CDO of CDOs or CDO2, owned pieces of another 37 CDOs.
One of Everquest's assets was half the equity tranches of a "toxic CDO" named Octonian I that Bear Stearns bought from Citigroup in March 2007. Bear had sold $13.2 million of the $24 million in equity tranches of Octonian I to Everquest, according to the S-1. Citigroup, stood to gain from the IPO because $150 million in cash from the proceeds of the IPO, would be used to pay down most of a $200 million credit line Citi had extended to Everquest. This would reduce Citi's exposure to losses from the subprime CDOs assets in Everquest.
The Everquest S-1 offering was withdrawn June 25, 2007. By July 17, one of the two troubled Bear Stearns hedge funds that invested in subprime was worthless and shares in the other were worth 9 cents on the dollar.

In reading this story I can't help but to reminisce over Alfred Hitchcock's classic film noir yarn Double Indemnity . In this masterpiece of greed and graft, a seasoned insurance salesman meets the seductive wife of one of his clients and they have an affair. She proposes to kill her husband to receive the prize of an accident insurance policy and he schemes to receive twice the amount based on a double indemnity clause.

People say that life imitates art. I just wish we had killed one well insured husband, instead of an entire economy.

Comments (12)

Mar 31, 2011

+1 SB for you.

Someone had actually tossed monkey shit at you, who is honestly that big of a shill for Citigroup to do that? God damn.

Mar 31, 2011
TheKing:

+1 SB for you.

Someone had actually tossed monkey shit at you, who is honestly that big of a shill for Citigroup to do that? God damn.

Thanks King. No worries, value investing in one self is not a concept many financial professionals grasp.
Telling a tot it will regret all those lollipops come the days of dental work won't keep it from slobbering sugar today.

Mar 31, 2011

I'm not the one who threw monkey poo
But I find your lack of keeping up
on current events
disturbing

http://cachef.ft.com/cms/s/0/f8d42e04-0181-11e0-9b...

Mar 31, 2011
RiskyBizness:

I'm not the one who threw monkey poo
But I find your lack of keeping up
on current events
disturbing

http://cachef.ft.com/cms/s/0/f8d42e04-0181-11e0-9b...

That doesn't even remotely change what he was saying. Also, if you don't think the TBTFs are inherently government backed at this point, then you're living on another planet.

Of course, you were probably in 'Intro to Microeconomics' back when all this shit went down, so, nevermind.

Mar 31, 2011
TheKing][quote=RiskyBizness:

I'm not the one who threw monkey poo
But I find your lack of keeping up
on current events
disturbing

http://cachef.ft.com/cms/s/0/f8d42e04-0181-11e0-9b...
That doesn't even remotely change what he was saying. Also, if you don't think the TBTFs are inherently government backed at this point, then you're living on another planet.

Of course, you were probably in 'Intro to Microeconomics' back when all this shit went down, so, nevermind.

I'm not trying to refute the entire OP. I'm just pointing out the first sentence was carved out for prose over accuracy. Yes, I was in school during the financial crisis. That's because I was in the military before going back to college. I assume you have opinions on the Iraq War, but I wouldn't condescend to speak to you about it over the internet because you were sucking up to bankers for a full time offer when I was putting warheads on foreheads.

Drop the insta-ad-hominem responses. You're the type of weak internet warrior that makes this site so obnoxious on a sadly regular basis.

Mar 31, 2011
RiskyBizness:

I'm not the one who threw monkey poo
But I find your lack of keeping up
on current events
disturbing

http://cachef.

What does this have to do with the OP at all? He isn't hating on Citi because they were bailed-out.

Mar 31, 2011

Citi = the borg

? anyone ?

Mar 31, 2011
UFOinsider:

Citi = the borg

? anyone ?

no...just something revived by zombie magic, like GM

Mar 31, 2011

Borg zombies!
Be afraid, be very afraid.

Mar 31, 2011

Perhaps your finger should have been pointed equally at the rating agencies. If anyone at S&P gave a shit, they would have done some homework before slapping AAA on the envelope.

Companies didn't have to list AAA "riskless" securities on their balance sheet. What a word, riskless !!

I, for one, doubt that many of the Wall Street heads had any clue what they were buying. They had no clue how bad the housing bubble was and how awful the mortgages were and how debased the lending standards were. The info was very hard to get on those securities.

When things blow up that bad, chances are a lot of people are at fault. In this case, the BORROWERS / LENDERS / WALL STREET FIRMS / CEOS / RATING AGENCIES / GOVERNMENT OFFICIALS.

No one gets out alive!

And don't worry, most banks forgot and are already whining about government regulation again.

Mar 31, 2011
jbert112:

Perhaps your finger should have been pointed equally at the rating agencies. If anyone at S&P gave a shit, they would have done some homework before slapping AAA on the envelope.

Companies didn't have to list AAA "riskless" securities on their balance sheet. What a word, riskless !!

I, for one, doubt that many of the Wall Street heads had any clue what they were buying. They had no clue how bad the housing bubble was and how awful the mortgages were and how debased the lending standards were. The info was very hard to get on those securities.

When things blow up that bad, chances are a lot of people are at fault. In this case, the BORROWERS / LENDERS / WALL STREET FIRMS / CEOS / RATING AGENCIES / GOVERNMENT OFFICIALS.

No one gets out alive!

And don't worry, most banks forgot and are already whining about government regulation again.

People knew what was going on. Yea whatever rating agencies messed up and all, but people ignored the facts/didn't do their homework and relied on the AAA stamp of approval. If "Wall Street heads" didn't know what they were buying, then they deserved to lose their job and their reputation.

Mar 31, 2011
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