Michael, You and many others do all you can to continue the negative rumors that hurt companies like Citi. You shoot out the rumors and short the stock. Make your bucks and hurt the average investor. Guys like you did it to Bear and Lehman. Why don't you just stop the rumor bull

It is okay for Citi Bank to get bailed out, but they won't bail out mortage holders!!I had a heart attacK, quadruple bypass and got behind on my mortgage because I couldn't work! I tried to make partial payments and they wouldn't take it!!My home is going to heck and empty and I am homeless. The druggies and bums live in my house now. They are selfish!!

I know all too well about these SPEs. We used to do them at the leasing company where I worked. Small potatoes, but they were a way to make the balance sheet look better. They will explode one day.

i agree im 90% faz bear on this im just waiting for the other foot to drop and sell..

"This purposely unclear presentation of off-balance sheet assets seems to have been accepted by Geithner and Paulson, and they will need to do the same for the next bank, and the next one, and the next one.".................What's wrong with these guys? The tax payers and investors get hoodwinked again. Will anyone be held accountable? We can only hope.

i don't understand why people would buy shakey securities, when there are ones that seem good, i guess its that gambling attitude........people hoping for massive gain, i remember a person on the financial blogs saying they would buy GM at 4 because that seems pretty cheap but it could drop .50 and you would lose tons

Michael you hit the nail on the head. I thank you for being candid enough to write it up. This alleged company and their Board of Directors are a perfect example of *Figures don*t lie - but liars figure. When they started their acquisition campaign, it should have been obvious to anyone with a corporate background what was taking place. Charles Prince so called removal was done with not so much as a murmur. He left the building so fast* the employees thought there was a fire drill taking place.

Giving this company *Bailout money* is the same as investing in *Phone Booths*. Our government is throwing our money away* as they are about to do with GM and Ford. All three of these companies are Broken* they are Beyond Economical Repair.

We have allowed Politian*s that have never made a business decision in their life to squander our money on something they know nothing about. They foolishly feel it takes skill to give other peoples money away. This is the height of incompetence.

This entire *Bailout Process* reminds me of the old *Abbott and Costello skit*. *** - Who*s on first* What*s on second* I don*t know*s on third*

maybe citi can be sold to the arabs and we can get our oil money back.

Michael, while you were trying to illustrate Citi's Q3 off-balance-sheet assets based on Pandit's 11/17 presentation, you failed to objectively explain your assumptions and perceptions on the following:

You said:"These off-balance sheet entities are similar in structure to Enron's SPVs (special purpose vehicles) Citi and other banks created, and in the past backed, and they hold assets of unknown quality. I can only assume if their value was known, and anywhere near par, they would be on the balance sheet."
------ FASB rules (Let's make it clear, it's not one's choice whether to leave these assets on of off the balance-sheet) on accounting for off-balance-sheet assets targets majority of securitized financial products. In a securitization, a company pools loans such as mortgages and credit card receivables, slices them into securities and sells them to investors, usually through a separate trust. The process allows the originating company or bank to get cash up front, while investors are paid off with the consumers' monthly payments. The issuer can also record profit from the sale to the trust and take the loans off its balance sheet. That reduces the amount of capital required as a buffer against losses, letting the company increase lending and boost earnings. It worked quite well to stimulate the economy during the "dotCOM Boom" and the "US Housing Boom", and it was NEVER a risky investment until the recent collapse of the US housing market (give-or-take since Mid 2007) and the Mark-to-Market Accounting Rules. As the existing/in-coming administrations have indicated that they would do whatever they can to rescue the Housing Market, these MBS (Mortgage Backed Securities) will be valued again. This is why the Gov. offered "Guarantee" to Citi's Mortgage/MBS related assets, therefore your assumption of "I can only assume if their value was known, and anywhere near par, they would be on the balance sheet." is completely absurd.



You said:""Citi does not bear credit risk. Unlikely that majority will come on balance sheet." If there is no credit risk, why not put them on the balance sheet or tell us what they are?Let's do some third-grade logic and math. First, let's take 40% of the $667 billion we are told not to worry about -- less than the "unlikely majority" -- roughly $265 billion. Then, add $122 billion coming on to the balance sheet. And add the mysterious $31 billion. So far, we're at $418 billion in assets that could come on to the balance sheet. Now add $324 billion and we get $742 billion that could come onto the balance sheet if accounting changes are not accepted.Second: $122 billion in QSPEs that will cease to exist when they are consolidated on the balance sheet.Third: a little bar for a mere $31 billion with no description.

Total: $820 billion.Three-quarters of a trillion dollars -- not covered, as far as I understand (details about the bailout are pretty fuzzy), under the current government bailout. And the only details are characterized by terms as precise as "unlikely," and, of course, we are told to wait for accounting changes."

------ So what are the "changes"? Why the changes? The Financial Accounting Standards Board took steps to remove the qualifying

special-purpose entity (“QSPE”) concept
from Statement of Financial Accounting
Standards No. 140, Accounting for
Transfers and Servicing of Financial Assets
and Extinguishments of Liabilities (“FAS
140”), and to remove the related scope
exception from FASB Interpretation No. 46,
Consolidation of Variable Interest Entities
(“FIN 46(R)”). Eliminating the QSPE concept
from FAS 140 and the scope exception under
FIN 46(R) will affect the manner in which
issuers of asset-backed securities (“ABS”)
account for securitization transactions. Any
proposed changes to FAS 140 and FIN 46(R)
will be subject to the FASB’s process for
public exposure of standards.
Under FAS 140, a securitization of financial
assets is treated as a sale rather than as
a secured borrowing if the transferor is
considered to have relinquished control over
the transferred assets, and the transferred
assets will not be consolidated on the
transferor’s financial statements if the
securitization trust qualifies as a QSPE. The
FASB voted as part of its short-term project
to address practical accounting issues under
FAS 140 and, in response to a request by
the Chief Accountant of the Securities and
Exchange Commission, to clarify the QSPE
guidance under FAS 140 in time for new
guidance to be effective no later than the
beginning of 2009. The FASB voted to remove
the QSPE concept from FAS 140 because,
members of the Board said, the FASB no
longer believes that the strict limitations on
QSPEs are practical in view of the amount
of discretion that servicers have over the
securitized assets in ABS transactions. FAS 140, the activities of a QSPE must be
significantly limited, must be specified in
the documents under which the QSPE was
created, and may be materially changed only
with the consent of a majority of the nontransferor
holders of the beneficial interests
in the QSPE.
A final "Proposed Statement, Accounting for Transfers of Financial Assets—an amendment
of FASB Statement No. 140 (issued 9/15/08) http://www.fasb.org/draft/ed_transfers_financial_assets_amend_st140.pdf " was deadlined for "out for comment" (as a routine procedure) on 11/14/08:

Quote 1. "a. It removes the concept of a qualifying special-purpose entity (SPE) from
Statement 140 and removes the exception from applying FASB Interpretation
No. 46 (revised December 2003), Consolidation of Variable Interest Entities (VIE),
to qualifying SPEs."

Quote 2. "It removes the special provisions in Statement 140 and FASB Statement
No. 65, Accounting for Certain Mortgage Banking Activities, for guaranteed
mortgage securitizations to require them to be treated the same as any other
transfer of financial assets within the scope of Statement 140, as amended by
this Statement. If such a transfer does not meet the requirements for sale
accounting, the securitized mortgage loans will continue to be classified as
loans."

Quote 3. "FASB Interpretation No. 46 (revised December 2003), Consolidation of
Variable Interest Entities, did not apply to interests in qualifying SPEs, except in certain
limited circumstances. Because a qualifying SPE was generally exempt from
consolidation, the Board decided that it was important to clarify its characteristics. As the
project progressed, the Board decided that other aspects of Statement 140 required
clarification or improvement, including issues related to isolation and the initial
measurement of interests in transferred financial assets that continue to be held by a
transferor."

As of 11/20/2008, the FASB has announced that "FSP to Amend Disclosure Requirements of Statement 140 and Interpretation 46(R)"http://www.fasb.org/news/nr112108.shtml

So, it's not "Fuzzy"/"Unlikely", it is going to be the new rule... and the calculations/interpretations behind 820Bln QSPE and 325Bln VIE are a lot more complicated than you 3-grade math.

Lastly, Michael, please refer to the following FDIC Q1 data, which illustrates the levels of "Derivative Exposures" of all major US Banks (Note: this is prior to BofA, JPM, WFC made their major acquisitions...)

http://bigpicture.typepad.com/comments/2008/08/us-bank-derivat.html

Summarize all the above, it is easy to undervalue assets (by the way, the Mark-to-Market Accounting Rules have been modified recently as well) that are once prominent, AAA-rated long-term investment in an economical crisis, but it is unfair to undermine the financial/operational strength of an entity solely based on one or two aspects, which our regulators, legislators have slowly come to realize. It is presumptuous that you have implied/hinted that the investors should "Stay away from Citigroup" or "The bottom line: For traders and investors, it is still time to avoid the banks, especially Citi."

Yes but they are giving toasters with all deposits.

Using taxpayer $ to bailout a multinational corp like Citi - am I watching the Wizzard of Oz where the Wizzard is magically telling everyone that all is OK and they have nothing to worry about - at least that fictional atory had a happy ending - this one may not.