Op-Ed: Citigroup says a lot, but who’s listening?

TARP is the big bailout, the Troubled Asset Relief Program. A bit of digging, and you’ll find a PDF which refers to Citigroup’s last quarter since the bailout. It's about what Citigroup has been doing with all that Federal money.

The first obvious thing is that at least someone is sensitive to the circumstances. The document is something like a hybrid press release/public relations/financial statement. The second thing that becomes obvious is that the financial media is banging the “nationalizing the banks” drum, and not much else. Citigroup’s release was made on 3 February, but the actual information was barely mentioned. There seems to be a divide between information available to the public and what anyone can be bothered telling the public. Citigroup’s statement is actually very interesting, and isn’t all doom and gloom. I don’t seem to recall being particularly overwhelmed by info from the financial media on this subject. Bloomberg published a brief, not very detailed, article on the date of release. CNN published a Fox like titled article “CNN comes clean on TARP spending”. Nor could anybody could say the public perception has been greatly enlightened since. The pattern of coverage is to put it mildly erratic. A lot of it looks like it was written more on the basis of deadlines than actual information quality. I’ve now written tens of thousands of words on the subject of the meltdown since 2007. Being one of the people who’s spectacularly and noisily unimpressed with the industry’s abysmally insular response to the crisis, I have to admit this is definitely not what I expected. Citigroup has been doing something, (quite a lot, actually) and what’s been done can be judged on its merits. This document is called: “What Citi is doing to expand the flow of credit, support homeowners and help the U.S. economy” Citigroup, it appears, hasn’t just been sitting on its butt, as the sector is perceived to be doing. It’s putting that bailout money to work. So if you were wondering where your $45 billion went, this is what you need to read. American readers will be pleased to hear that it doesn’t contain a word of Market Speak and associated equivocal babblings. It’s a competently prepared, plain language, document. It would also be one of the first statements released by a major bank in relation to TARP. A few points not mentioned by Bloomberg or CNN: Citigroup says it managed to keep 80% of distressed mortgagees in their homes in 2008, which was the Shootout At The Not OK Corral for America’s homebuyers. A total of 440,000 people have successfully avoided foreclosure. (That’s not news, apparently, even if it is 440,000 more people than previously known to have successfully reworked their mortgages with lenders. Actually, that’s headlines, because the theory, in case anyone’s forgotten, is that these mortgages are unworkable.) Ten billion dollars went straight into purchases of mortgages owned by Fannie Mae and Freddie Mac, in two $5 billion packages in different classes of investment. Note that this also miraculously provides liquidity to the two agencies, which are standing in for the horse in Animal Farm as far as the mortgage meltdown is concerned. Citigroup is also purchasing $7.5 billion in prime residential mortgages. That’s more money going straight to the lending market. You see the insight into how TARP is working. These loans are going into strategic moves which are basically covering mortgage assets and supplying funds directly to the market. $8.2 billion in loans is going to

…non-conforming mortgage loans – defined as mortgages whose value exceeds the limits set for government-sponsored loans. These limits range from $417,000 to $625,500 in the continental United States, depending on the county.

Put another way, in that price range: Good quality high bracket, good return investments. A small $2.5 billion is going into personal and business loans. This has all the appearances of a pilot program, because this class of loan is one of the most common, and important, types of loan in this environment. It looks like Citigroup is exploring this market. Student loans: $1 billion. Another interesting move, because that’s a very high sensitivity part of the market. Credit card lending $5.8 billion. Not a lot, in terms of the American consumer economy, but definitely another strategic position. Citigroup might be looking for a good, wide open customer base which is struggling to get credit. This is practical business, and the move from the Fed to Citigroup to Fannie and Freddie is actually a very good way of getting multiple uses out of the bailout money. It's anything but inept. I’m not going to regurgitate the whole document, but it’s worth reading. If you want a look at how TARP is governed, it’s also highly informative. The rules are very clear. There’s no waffle, no econo-babble. If you’re American, it’s 43 pages of fascination. Citigroup doesn’t pretend things are fine, but they do spell out their own position. Pity the media aren’t reading it. I'm no fan of the financial clown factory. This is good business, as far as I can see. Credit where it's due.