Bailout

Is Another $300+ Billion Enough to Save Citi?

By Admin

Staying true to the commitment Secretary Paulson and Fed Chairman Bernanke have reiterated over the last two months, they committed over $300 Billion during private talks over the weekend to save Citigroup, more money than was publicly and gut-wrenchingly extracted from Congress during the several week battle over the bailout bill in September.

This raises the total government commitment to saving the nation’s banks to over $7.7 Trillion and raises questions about how much more money is required to save ALL the banks from the fate Citi entered the weekend facing.

last week, Friedan Billings Ramsey analyst Paul Miller argued banks need another $1 to $1.2 Trillion of capital to sure up their balance sheets. The US financial system has $37 trillion of debt outstanding, yet the eight largest private financial institutions– representing over half of all regulated financial service assets– have roughly $12.2 Trillion of assets and only $406 Billion of tangible common capital, not a very confidence inspiring ratio.

How healthy are US Banks?

Even with new capital, what are the prospects banks can grow and earn enough income on that capital to repay the government?  It appears long-standing trends in the US economy– relative global competitiveness, etc.– quite separate and apart from the housing crisis have diminished the rate of return on bank provided capital.  What might Hank and Ben not be telling us?

Full post as published by Bailout Report on November 24, 2008 (boomark / email).