Citi-Citi-BANG-BANG ~ KARL DENNINGER

peaceandlove · 11-02-2009, 06:30 PM

Citi-Citi-BANG-BANG!

Sunday, November 1. 2009
Posted by Karl Denninger

Oh boy, it appears that I may have hit the mark here....http://www.nytimes.com/2009/11/01/bu...html?_r=1&8dpc

Of the company’s $1.2 trillion in credit commitments outstanding in the second quarter, $873 billion were credit card lines

.

And the charge-off rate on those things is over 10%!

Here's what I wrote:

Both of these "results" have a high probability of decimating Citibank's card business and the latter behavior could literally blow them up. That the firm is willing to risk this outcome - an outcome that, to me at least, appears to have a very high probability - means that Citibank has to be crazily-desperate and willing to place an "all-in" bet that they will be able to either (1) book unpaid "interest" as "earnings" and "assets" (much as banks did with negative amortization loans) prior to final disposition via bankruptcy for those consumers or (2) there are enough people who both can't pay off or transfer the balance AND can continue to pay to make this strategy worthwhile even given the intensely negative public opinion reaction this move is guaranteed to generate.

In short, this looks to me like a "Hail Mary" pass. So long as this remains a Citibank-only story my interpretation is that Citibank is in a lot worse financial shape than is being let on - perhaps poor enough that they're at risk of imploding anyway, "too big to fail" or not.

Good luck Citibank; I'll keep my telescope trained in your direction from beyond "minimum safe distance" looking for this....

(Not Karl's original blowup image at his link. Inserted my own!!! LOL)

Disclosure: No position; I don't short stocks under $10. IMHO this issue has a high probability of being a zero.

SOURCE: http://market-ticker.denninger.net/a...G-BANG!-C.html

11-02-2009, 06:30 PM	#1
peaceandlove Avalon Senior Member Join Date: Sep 2008 Location: Turtle Island Posts: 2,776	Citi-Citi-BANG-BANG ~ KARL DENNINGER Citi-Citi-BANG-BANG! Sunday, November 1. 2009 Posted by Karl Denninger Oh boy, it appears that I may have hit the mark here....http://www.nytimes.com/2009/11/01/bu...html?_r=1&8dpc Of the company’s $1.2 trillion in credit commitments outstanding in the second quarter, $873 billion were credit card lines . And the charge-off rate on those things is over 10%! Here's what I wrote: Both of these "results" have a high probability of decimating Citibank's card business and the latter behavior could literally blow them up. That the firm is willing to risk this outcome - an outcome that, to me at least, appears to have a very high probability - means that Citibank has to be crazily-desperate and willing to place an "all-in" bet that they will be able to either (1) book unpaid "interest" as "earnings" and "assets" (much as banks did with negative amortization loans) prior to final disposition via bankruptcy for those consumers or (2) there are enough people who both can't pay off or transfer the balance AND can continue to pay to make this strategy worthwhile even given the intensely negative public opinion reaction this move is guaranteed to generate. In short, this looks to me like a "Hail Mary" pass. So long as this remains a Citibank-only story my interpretation is that Citibank is in a lot worse financial shape than is being let on - perhaps poor enough that they're at risk of imploding anyway, "too big to fail" or not. Good luck Citibank; I'll keep my telescope trained in your direction from beyond "minimum safe distance" looking for this.... (Not Karl's original blowup image at his link. Inserted my own!!! LOL) Disclosure: No position; I don't short stocks under $10. IMHO this issue has a high probability of being a zero. SOURCE: http://market-ticker.denninger.net/a...G-BANG!-C.html