Citigroup Was On The Verge Of Failure, New Report Finds; Rescue Was Based On 'Gut Instinct' - HuffPo

[WillyT]

Citigroup Was On The Verge Of Failure, New Report Finds; Rescue Was Based On 'Gut Instinct'
Shahien Nasiripour - HuffPo
First Posted: 01-13-11 03:33 PM | Updated: 01-13-11 04:19 PM

<snip>

Citigroup, the nation's third-largest bank by assets, was on the verge of being closed by regulators the week of Nov. 24, 2008 as depositors rapidly withdrew money and the bank's counterparties declined to provide it credit, according to a government report released Thursday.

The new findings shed light on the degree to which Citigroup, the financial services behemoth with a long history of finding itself in trouble and receiving government support, was actually in danger of failing during the fall of 2008. Until now, few were aware that Citi was perilously close to being shut down.

"We were on the verge of having to close this institution because it can't meet its liquidity Monday morning," said Sheila Bair, chairman of the Federal Deposit Insurance Corporation, during a meeting the previous Sunday night, according to the report by the Special Inspector General for the Troubled Asset Relief Program.

"Without substantial government intervention," said another FDIC official, bank regulators and Citigroup "project that Citibank will be unable to pay obligations or meet expected deposit outflows next week," according to the report. Yet while policy makers unanimously agreed that Citigroup needed additional help -- this was after the megabank had already received $25 billion in TARP funds -- the "strikingly ad hoc" nature of the response was troubling, notes the inspector general, known as SIGTARP.

Citigroup's problems were well known to regulators. In May 2008 -- six months before the second multi-billion dollar infusion of taxpayer cash into the lender -- regulators at Geithner's New York Fed forced the bank to create a plan to strengthen its risk-monitoring practices so it could better judge the bank's exposures. A month later, bank overseers at the Office of the Comptroller of the Currency compelled the bank to enter into another agreement, this time requiring upgrades to the firm's risk management. That agreement is still in effect today, according to SIGTARP's report.

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More: http://www.huffingtonpost.com/2011/01/13/citigroup-was-on-the-verg_n_808721.html

:kick:

[indepat]

1. Now ain't this so special and maybe spreads light on the government's (was it +/- $300 billion)

humongous guarantee of CITI's assets. But how else could egregious bonuses keep flowing freely and wildly? :shrug:

[marmar]

2. Should have let them rot in pieces.

nt