Some Comments

I have quoted the CHOICE Asset Management Team before. I will try to not do it too much given how sarcastic they tend to be, but I thought the following comments were fitting.

"The 5.4 billion share Citigroup offering designed to repay TARP did not go particularly well for taxpayers, who actually came out of the botched secondary (was priced 20% below prevailing prices the day prior to the deal’s announcement, pushing the offering below the government’s $3.25 cost and thwarting plans to sell 1 billion of our shares) with more restrictions on our stock than we had going in (can’t sell for 90 days, and don’t forget that our common-share stake originally came in the form of a more-senior interest-bearing preferred). We still own 7.7 billion shares (“down” from a 34% to a 27% stake in the company due to the share dilution), but the bank that never sleeps can pay bonuses in 2010 now, hoo-ray!"

"The IRS and Treasury did what they could to help the deal, by giving it an exception for longstanding change-of-ownership rules that “would have” eliminated the value of Citi’s $38 billion of tax loss carry-forwards. Didn’t Mr. Obama just a week ago say something about getting tough on “fat cat bankers”? (Recall that C employs 46 full time lobbyists, more than any other company – Mr. “Whatever it takes” Geithner may have missed 60 Minutes that night.)"

"Today Bloomberg is running a story mentioning that C shares need to at least triple by 2018 for the warrants that taxpayers own to have any value (we own 255 million warrants to buy stock at $10.61/share and another 210 million at $17.85/share). The latter would give it a half-trillion market capitalization, more than what any US bank has ever achieved."

"We should note that Wells Fargo’s $10.7 billion offering appeared to go off without a hitch (and probably contributed to buyer indigestion for Citi), allowing it to repay its $25 billion loan from taxpayers."

"That occurred even as Citigoup and Wells Fargo repaid their respective $20 and $25 billion TARP borrowings to the US Treasury (taxpayers)."

"Positive as that is, we hope Americans can see through officials’ curious assessment that TARP has been “profitable,” since taxpayer “investments” in AIG, Fannie Mae, and Freddie Mac (among others) have expanded, rather than contracted. In referring to TARP “profits,” officials are ignoring unrealized losses on AIG, Fannie Mae, and Freddie Mac. Using the same logic, an investor might declare his or her portfolio to be “profitable,” provided they excluded underwater positions they still own in their portfolio."

"The Treasury announced it is lifting its $400 billion cap to support Fannie Mae and Freddie Mac, and now will provide “unlimited” support, likely signaling that mortgage losses are set to grow in 2010. Treasury said its announcement “should leave no uncertainty about Treasury’s commitment to support these firms as they continue to play a vital role in the housing market during this current crisis.”

"The same day, Fannie and Freddie announced its chief executives would receive $6 million in remuneration for 2009, a year in which both firms lost billions of dollars and required taxpayer support to remain solvent."

"Was the timing of these announcements on Christmas Eve merely a coincidence, or was the timing strategically designed so that the news would get “lost” over a long weekend, in which Americans were focused on family, friends, and the holiday season? You know the answer."

"Does anyone recognize that Treasury is conducting fiscal policy, which once (see Article 1, Section 7 of the US Constitution) was thought to be Congress’ responsibility?"