[Sustain] Fwd: SPECIAL: Home Planet Money Emergency

[Don Eichelberger]

Here is an interesting set of articles comprising 
a good primer on the current home mortgage crisis and the primary players.

Traceable cause?:

"The troubles faced by Citigroup are linked to 
the enormous expansion of speculation by US 
banks. This speculation has been encouraged by 
the deregulation of the financial sector, 
including the repeal of the Depression-era 
Glass-Steagall Act in 1999. The repeal, carried 
out under the Clinton administration, broke down 
the wall between investment and commercial 
banking. This made conglomerates such as 
Citigroup possible, and encouraged the closer 
integration of the banking system with Wall Street. "

Banking deregulation has put more power in to a 
complexity of business relationships overseen by 
many who practice and make the law.  I am 
increasingly convinced that the legal profession 
has drawn a large share of unscrupulous 
practitioners who define the laws by their 
limits, and what can be transgressed without 
breaking "legal" boundaries, or in this case, extending the boundaries.

I can share my thoughts at a later time on this 
Cabal that has been forming since Reagan days, 
and has been enabled by Democrats like Clinton, 
whose "run government like a corporation" ethic transgresses party lines.

But for now, enjoy the heartbreak,

Don

>To: keith lampe <prez at usa-exile.org>
>Subject: SPECIAL: Home Planet Money Emergency
>From: "President, USA Exile Govt" <prez at usa-exile.org>
>Date: Thu, 29 Nov 2007 06:48:19 -0500
>FREE UNIVERSITY
>Transferring Prime Human Attention from Objects to States of Mind
>   Via <prez at usa-exile.org>
>    November 29, 2007
>
>Dear Friends and Colleagues,
>      Peter Myers has put together an 
> interesting mix of pieces on the current 
> financial meltdown--and here they are.
> 
>Regards,
> 
>Pondo
>
>From: Peter Myers <myers at cyberone.com.au>
>Date: November 29, 2007 5:57:00 AM EST
>To: Howard Miller <macserve at applelinks.net>
>Subject: Lyndon LaRouche, ignored at home, but endorsed by Chinese Government
>
>Critics might say I am a supporter of Lyndon 
>LaRouche; but I find his material a mixed bag.
>
>Although he plays only a small role in the US, 
>Britain & Australia, partly through the media’s 
>demonisation of him (when it is not just 
>ignoring him), he does play a major role in the 
>world, because his literature reveals at least 
>part of the conspiracy running those countries. 
>China’s government learns much about what is 
>really going on, from his literature, and, no 
>doubt, from conspiracy-revealing websites on the internet.
>
>In the West, we are rubbished as Conspiracy 
>Theorists. But on a world scale, we are important.
>
>(1) Credit crisis reveals widespread accounting manipulation by top US banks
>(2) China trying to dump $1.4 trillion in U.S. 
>Securities for Euro denominated purchases
>(3) Lyndon LaRouche, ignored at home, but endorsed by Chinese Government
>(4) China’s press report on Larouche’s statement on financial crisis
>(5) US banking crisis - Citigroup borrows $7.5 billion from Abu Dhabi
>
>(1) Credit crisis reveals widespread accounting manipulation by top US banks
>
>From: "Dick Eastman" <olfriend at nwinfo.net>
>Date: Tue, 27 Nov 2007 14:10:17 -0800
>
><http://www.wsws.org/articles/2007/nov2007/econ-n27.shtml>http://www.wsws.org/articles/2007/nov2007/econ-n27.shtml 
>
>
>27 November 2007
>
>Credit crisis reveals widespread accounting manipulation by top US banks
>
>By Joe Kay
>
>The developing credit crisis in the United 
>States, linked to the bursting of the housing 
>market bubble, is beginning to reveal the 
>accounting manipulations employed by major US 
>banks to engage in speculative activities and 
>hide risks. Several major banks have already 
>announced billions of dollars in losses 
>associated with subprime mortgages, and in the 
>next months are expected to announce tens of 
>billions of dollars in further write-downs.
>
>Among those most severely affected is 
>Citigroup—an American financial conglomerate 
>that is the world’s largest company measured by 
>asset value. CNBC reported on Monday that 
>Citigroup is planning major cost-cutting in 
>response to its difficulties, with layoffs of up 
>to 45,000 of the company’s approximately 320,000 employees.
>
>In a statement, the bank insisted that reports 
>involving specific numbers of layoffs were “not 
>factual,” but acknowledged that the company is 
>“planning ways in which we can be more efficient 
>and cost effective to position our businesses in 
>line with economic realities.” New cuts would 
>come on top of 17,000 layoffs announced in April.
>
>The announcement, coming amidst Wall Street 
>nervousness over the ongoing credit crisis, sent 
>Citigroup’s stock down more than 6 percent. Over 
>the past six months, the price of the company’s 
>stock has fallen nearly 50 percent. Citi led a 
>steep market decline on Monday, with the Dow 
>Jones Industrial Average falling nearly 240 
>points, more than wiping out its increase on Friday.
>
>Chief among the “economic realities” behind 
>Citigroup’s announcement is the credit crisis 
>brought on by record defaults on home mortgages 
>in the United States. Citigroup has already 
>announced a $5 billion write-down related to 
>home mortgages, which provoked the resignation 
>of its CEO Charles Prince. It is expected to 
>announce further losses of up to $11 billion in the fourth quarter.
>
>The bank’s exposure could be much greater, 
>however, as it may be forced to acknowledge 
>losses that it had previously kept off its 
>books. An article by Wall Street Journal 
>reporter David Reilly on Monday (“Citi’s $41 
>Billion Issue: Should it put CDOs On the Balance 
>Sheet?”) noted that the bank faces an “immediate 
>threat” from troubles involving 
>off-balance-sheet entities called collateralized debt obligations (CDOs)
>
>The Journal notes that Citigroup “was one of the 
>biggest arrangers of CDOs—products that pools 
>debt, often mortgage securities, and then sell 
>slices with varying degrees of risk.” The bank 
>may be forced to bring these CDOs onto its 
>balance sheet. “If Citigroup had to include an 
>additional $41 billion in CDO assets on its 
>books,” the Journal noted, “that could 
>potentially spur a further $8 billion in 
>write-downs, above and beyond those already 
>signaled, according to a report earlier this 
>month by Howard Mason, an analyst at Sanford C. Bernstein.”
>
>Throughout the housing boom of the past several 
>years, the CDOs, and related entities known as 
>structured investment vehicles (SIVs), made 
>substantial returns. SIVs are also 
>off-balance-sheet entities, but are more 
>open-ended, investing in other risky securities, 
>including CDOs. Even those entities closely 
>associated with banks have been nominally 
>independent. The “independence” of these 
>entities has been entirely fraudulent, however. 
>They have been critical for the banks’ bottom 
>line as sources of lucrative fees, buying up 
>mortgages and other assets from their parent banks.
>
>As the CDOs and SIVs have faltered with the 
>collapse of the housing bubble, the banks have 
>looked for ways to bail them out. The Journal 
>notes, “Over the summer, [Citigroup] was forced 
>to buy $25 billion in commercial paper issued by 
>its CDO vehicles because investors were no 
>longer interested in the paper. Citigroup 
>already had an $18 billion exposure to these 
>vehicles through other funding it had provided.”
>
>The determination with which Citigroup and other 
>banks have scrambled to bail out these 
>investment entities is itself testament to the 
>fact that they were never really independent to begin with.
>
>Commenting on the way that major banks were able 
>to shift their risks off their balance sheets, 
>New York Times economic writer Floyd Norris 
>noted in an article published November 16 (“As 
>Bank Profits Grew, Warning Signs Went 
>Unheeded,”), “Instead of being suspicious, many 
>analysts believed that banks had found a new way 
>to prosper. Making a loan and keeping it on the 
>balance sheet until it was repaid was so 
>old-fashioned. It was far better to collect fees 
>for arranging transactions and passing on the risks to others.”
>
>In fact, many of these risks were not really 
>transferred. Norris notes that the banks often 
>made arrangements (called “liquidity puts”) with 
>the purchasers of their CDO securities that 
>would allow the purchasers to sell the CDO 
>securities back to the bank if there was no 
>other market. “That risk may have seemed slight 
>when the securitization market was booming. But 
>now the banks are being forced to buy back 
>securities for more than they are worth.”
>
>In essence, the puts allowed the banks to sell 
>CDOs and other assets without really selling 
>them. Use of the puts actually increased as the 
>housing market began to unravel, as it was 
>necessary to provide the guarantees in order for 
>the banks to get investors to buy 
>mortgage-backed securities whose value was increasingly in question.
>
>The legality of these operations is highly 
>dubious, since part of the intention appears to 
>have been to mislead investors regarding the 
>financial health of the company. Even if the 
>operations by banks were legal, the fact that 
>they were not reported to investors was likely a 
>violation of accounting rules.
>
>According to Norris, Citigroup and Bank of 
>America were among those banks that used “liquidity puts” heavily.
>
>All of these arrangements amount to attempts by 
>banks to gamble on risky investments without 
>acknowledging the risks they were taking on. As 
>the market for these investments has begun to 
>collapse, the real extent of the losses is only 
>beginning to reveal itself—and no one knows how severe the crisis really is.
>
>Most banks were involved in such activities. 
>Earlier this month, the Securities and Exchange 
>Commission opened an investigation into 
>investment bank Merrill Lynch that, according to 
>the Wall Street Journal, is intended to examine 
>how the bank “has been valuing, or ‘marking,’ 
>its mortgage securities and how it has disclosed its positions to investors.”
>
>In a November 2 article, the Journal reported 
>that Merrill arranged one deal with a hedge fund 
>to sell $1 billion in commercial paper related 
>to mortgages, while giving the hedge fund the 
>right to sell it back after one year at a set 
>price. The newspaper later corrected its article 
>to note that this deal, similar in many ways to 
>the arrangements at Citigroup, was rejected 
>because the bank determined that it was a violation of accounting rules.
>
>Nevertheless, Merrill is highly exposed to the 
>housing markets. Earlier reports suggested that 
>Merrill hid its own exposure to the subprime 
>mortgage crisis by shifting its assets to 
>different parts of the company subject to less 
>strict accounting regulations. (See “Wall Street 
>hides impact of subprime mortgage meltdown”)
>
>As late as July 2007 executives at the bank, 
>including former CEO Stan O’Neal, were assuring 
>employees that its mortgage risks were under 
>control. At the end of October, Merrill 
>announced a $7.9 billion write-down, which was followed by O’Neal’s departure.
>
>The crisis facing banks is an international 
>phenomenon. The stock market sell off on Monday 
>was provoked in part by an announcement from 
>British-based HSBC—Europe’s largest bank and the 
>world’s fourth largest corporation in terms of 
>assets—that it would bail out two of its SIVs 
>and transfer their assets onto its balance sheet.
>
>Since the credit crisis began in full force this 
>summer, banks have scrambled to stave off a 
>reckoning with the enormity of the losses 
>involved. The hope has been that the economic 
>crisis will be short-lived and that the housing 
>market will eventually recover, restoring the value of the assets in question.
>
>It is unlikely that this will happen, however, 
>and there is an increasing likelihood of a 
>recession. In an article published in the 
>Financial Times on Sunday (“Wake up to the 
>dangers of a deepening crisis”), Lawrence 
>Summers, former Treasury Secretary in the 
>Clinton Administration, warned, “[T]he odds now 
>favor a US recession that slows growth 
>significantly on a global basis.” Summers noted, 
>“Forward-looking indicators suggest that the 
>housing sector may be in free-fall from what 
>felt like the basement levels of a few months ago.”
>
>The initial revelations of accounting 
>manipulations and indications of fraudulent 
>activities are only a small indication of the 
>extent to which the American economy is pervaded 
>by financial speculation and out-and-out criminality.
>
>It was the collapse of the dot-com boom in 2001 
>that ultimately unwound the elaborate structure 
>of corruption at companies such as Enron, 
>WorldCom, and Tyco. These companies were no 
>longer able to perpetuate their fraudulent 
>activities once the stock market ceased its continual upward march.
>
>The major banks were heavily involved in the 
>activities exposed at that time. In 2003, 
>Citigroup and JP Morgan Chase were forced to pay 
>out fines for aiding Enron in disguising loans 
>as cash to reduce reported risk and liabilities, 
>thereby defrauding investors. Essentially, the 
>banks gave Enron loans, but cloaked these loans 
>in an apparent purchase of assets. This 
>manipulation improved Enron’s financial reports, 
>which was beneficial for banks that were heavily 
>invested in Enron stock. (See “Citigroup, Morgan 
>Chase fined for Enron deals: corruption at the heights of American finance”)
>
>The operations involving CDOs and SIVs bear a 
>certain resemblance in that they too were 
>evidently intended to disguise risk. Much of the 
>risk was ultimately held by the bank itself, but 
>this was not readily apparent to investors.
>
>Though the banks were involved in the 
>manipulations at Enron and other companies, the 
>fraud was generally explained by the media and 
>the political establishment as the product of a 
>few “bad apples.” Several executives were put on 
>trial and imprisoned, but the underlying 
>conditions remained and the banks remained 
>largely untouched. The dot-com bubble was 
>quickly replaced by the housing bubble, which 
>had the effect of extending the speculative 
>mania of Wall Street to a much broader section of the economy.
>
>The pervasiveness of accounting manipulation is 
>closely linked to the increasingly dominant role 
>that speculation has come to play in the 
>American economy. Vast sums of wealth—including 
>tens and hundreds of millions of dollars to top 
>executives and hedge fund managers—have been 
>made through mechanisms that are largely 
>divorced from any relationship to actual 
>production. The importance of these forms of 
>speculative wealth accumulation has increased as 
>the underlying health of the American economy has decreased.
>
>The housing market has been a case in point, as 
>a small layer of the population has made 
>billions through high-risk loans to working 
>class Americans who are now bearing the burden 
>of a crushing level of debt. The loans have been 
>used to transfer wealth into the hands of the 
>ruling elite, and at the same time became a means of speculation.
>
>Entities such as CDOs and SIVs were set up as a 
>means for Wall Street to extract enormous 
>profits, while at the same time cloaking the 
>extremely fragile foundation for this supposed 
>economic growth. As the housing market deflates, 
>this whole structure is beginning to unravel.
>
>(2) China trying to dump $1.4 trillion in U.S. 
>Securities for Euro denominated purchases
>
>From: "Dick Eastman" <olfriend at nwinfo.net>
>Date: Tue, 27 Nov 2007 15:26:31 -0800
>
>From: no matters <atoyuma at yahoo.com> (Chris L.)
>Date: Nov 27, 2007 3:49 PM
>
>Arlington Institute issues a Financial Alert based on M·CAM Analytics
>
>Kenneth Dabkowski, Executive Director -- The Arlington Institute
>
><http://www.m-cam.com/display_news?id=240>http://www.m-cam.com/display_news?id=240 
>
>
>Berkeley Springs, West Virginia -- November 19, 
>2007 -- At a recent board meeting of The 
>Arlington Institute, Dr. David Martin, CEO of 
>M·CAM and one of the members of the board was 
>asked for his assessment of the global financial 
>situation in the coming months.
>
>Here are the notes from his response:
>
>I stand by my commentary in July of '06.
>
>     * The next shoe to fall is consumer credit
>
>Currently as reports came in on 3rd quarter, 
>foreclosures were up 470% this quarter alone. 
>They will be up over 500% this coming quarter 
>(4th). A foreclosure in our terms is when the 
>bank has officially declared an account 
>insolvent and tries to regain the asset (if it 
>exists). The person who is foreclosed upon can 
>no longer secure any traditional consumer 
>credit. This in turn goes straight to the banks 
>as no one will be able to get the store issued charge cards.
>
>A minority of people pay off their consumer debt 
>every month. When one considers the combination 
>of consumer credit card debt and the compounded 
>debt of "home equity" financing, we estimate 
>that less than 20% of people actually carry no 
>consumer credit from one month to the next. Many 
>of the ones who don't pay off their carried 
>consumer debt have at least one credit card at 
>its limit and therefore lack credit capacity. 
>Most have their paycheck directly covering bills 
>and servicing the minimum balance due.
>
>Therefore people who are foreclosed upon will 
>not be able to obtain credit and since their 
>paychecks will be maxed out, there will not be 
>extra cash left over from the paycheck to service a new debt.
>
>Next, everybody buys things at Christmas. As 
>much as 40% of retail sales are done in the 4th 
>quarter of the year -- i.e. the retail miracle. 
>The purchase decline in retail goods this fourth 
>quarter will occur because many credit-only 
>consumers will lack the credit capacity 
>mentioned above. Frequently, people overcharge 
>their limit and the banks (albeit a profit 
>center for subprime credit users) levy a penalty 
>by increasing interest rates and charging 
>additional fees. In the 4th quarter of 2007, the 
>amount of people overcharging their limits will 
>be too many for the banks to handle. We do not 
>have a system in place to deal with overcharge 
>on that scale. A substantial number of this 
>December's purchases will go into an overdraft on credit limits.
>
>... An effort by China to convert its $1.4 
>trillion U.S. Treas. holdings into euros is not 
>viable for many reasons -- not the least of 
>which is the European Central Bank's inability to absorb such an event.
>
>As China continues its rush away from supporting 
>U.S. Treasuries and as Middle Eastern investors 
>are buying them up in more diversified holdings, 
>a new "currency exchange" is unfolding. 
>Realizing that they cannot liquidate their 
>holdings, it appears that the Chinese are 
>currently using their U.S. Treasury holdings as 
>collateral for euro denominated purchases and 
>long term infrastructure transactions. In other 
>words, they may be "liquidating" their holdings 
>as collateral and, in so doing, effectively 
>migrating to non-dollar value without ever 
>having to officially dump their current Treasury holdings.
>
>Therefore, collateralize the credit in dollars 
>-- especially if you're long in dollars. The 
>lender/financier won't call the note because you 
>have it structured in such a way to both allow 
>it to perform and hold illiquid collateral that 
>no one wants. This essentially inflates euros. 
>Although you can't sell dollars, the whole 
>purpose of collateral is that it is a second 
>source of payment -- collateral is there to down 
>rate the risk of the loan. Secondary becomes irrelevant.
>
>When February comes, the Chinese are going to do 
>something as they will have to decide what the 
>exposure is going to be with the treasury. As I 
>see it they have to just dump the treasury. They 
>only keep it because they can use it -- they 
>have 43% direct/indirect of US treasuries so they'll dump them on the market.
>
>The US Congressional pressures to decouple the 
>RMB will work, but not in the way we want. Our 
>plan includes helping them hold on to the 
>treasuries, it does not involve them not holding 
>the dollar anymore. The US wanted the tether to 
>be part of the float. This will cause 
>disenfranchisement of the US electorate (during 
>primary season). February is also when public 
>(media) will realize we won't pull out of this.
>
>(3) Lyndon LaRouche, ignored at home, but endorsed by Chinese Government
>
>From: CEC Media Release<mediarelease at cecaust.com.au>
>Date: 28 Nov 2007 22:08:51 +1100
>
>Citizens Electoral Council of Australia
>
>Media Release  28th of November 2007
>
><http://www.cecaust.com.au>http://www.cecaust.com.au
>
>China endorses LaRouche's call to solve global monetary crisis
>
>As the keynote speaker at a November 24 Los 
>Angeles Forum on U.S.-China Relations, Lyndon H. 
>LaRouche called for the United States and China 
>to join hands to reform the world financial 
>system as it enters the most deadly crisis in recent centuries.
>
>Specifically, LaRouche's proposal calls for 
>co-operation of the governments of the U.S.A., 
>Russia, China, and India, to bring the present 
>international crisis under control, and, 
>therefore, to rally a majority of the world's 
>nations to stabilise the world system through 
>bankruptcy reorganisation and a new Bretton 
>Woods fixed-exchange rate system, thus providing 
>the foundation for general economic recovery.
>
>Immediately following this intervention, 
>LaRouche's call became leading news around the 
>world, including coverage in Chinese, Arabic, 
>Farsi and Hungarian-language media. The three 
>official Chinese government press agencies: 
>Xinhua, People's Daily (the world's largest 
>circulation newspaper) and China Daily published 
>an eight-paragraph press release summarising his 
>proposals. Coming from government agencies, this 
>is an overt endorsement of LaRouche's policy 
>prescriptions by the Chinese government.
>
>By the next day, LaRouche's warning that "the 
>end of the present world monetary-financial 
>system is inevitable, unless the system is 
>replaced by a new world system during a 
>relatively brief, remaining time" was also 
>appearing on important Chinese financial 
>websites, including the China Securities Journal, and the China Business Post.
>
>The article was listed among the "most popular" 
>of the previous 24 hours on the People's Daily 
>website. The Chinese report was also published 
>in the Xinhua Arabic-language news service. 
>Iran's Press TV website ran a feature on 
>LaRouche's contribution to the event, quoting 
>him saying, "The world financial system has 
>entered the most deadly crisis in recent 
>centuries." LaRouche's call was also covered in the Budapest Business Journal.
>
>Click here for the English-language version of the Chinese press release:
><http://news.xinhuanet.com/english/2007-11/25/content_7140919.htm>http://news.xinhuanet.com/english/2007-11/25/content_7140919.htm 
>
>
>(4) China’s press report on Larouche’s statement on financial crisis
>
><http://news.xinhuanet.com/english/2007-11/25/content_7140919.htm>http://news.xinhuanet.com/english/2007-11/25/content_7140919.htm 
>
>
>Economist: U.S., China should join hands to reform world financial system
>www.chinaview.cn 2007-11-25 11:04:58            Print
>
>LOS ANGELES, Nov. 24 (Xinhua) -- The United 
>States and China should join hands in an effort 
>to reform the world financial system, which has 
>currently entered the most deadly crisis in 
>recent centuries, a renowned U.S. economist said Saturday.
>
>"The end of the present world monetary-financial 
>system is inevitable, unless the system is 
>replaced by a new world system during a 
>relatively brief, remaining time available," 
>said Lyndon La Rouche at a luncheon at the Forum 
>on U.S.-China Relations and China's Peaceful Reunification.
>
>La Rouche, also a famous political activist, 
>said the present international financial crisis 
>could only be brought under control when major 
>countries like the U.S. and China cooperate.
>
>"Whenever a powerful combination of national 
>governments can arrive at a suitable agreement 
>to change a failed financial-monetary system, a 
>solution for any modern financial crisis can be found," he said.
>
>He said that the United States should propose to 
>form an initial sponsoring group made up of the 
>governments of the U.S., China, Russia and 
>India, therefore to rally a majority of nations 
>in order to stabilize the world system.
>
>LaRouche lamented that all evidence has 
>confirmed the current crisis, notably the recent 
>collapse of the U.S. dollar' exchange rates 
>against other major currencies, but nothing 
>visible had been done so far by any government 
>to change the world financial system to solve the problem.
>
>The forum, jointly organized by several local 
>Chinese-American, gathered nearly 100 government 
>officials, scholars and activists form the U.S. 
>and China, who were expected to discuss issues 
>on U.S.-China relations and their implications 
>on the Taiwan issue during the two-day event.
>
>"The Taiwan issue remains the sensitive core 
>issue in China-U.S. relation," said Zhang Yun, 
>consul general of China in Los Angeles, while 
>speaking earlier at the forum's opening ceremony.
>
>(5) US banking crisis - Citigroup borrows $7.5 billion from Abu Dhabi
>
><http://www.wsws.org/articles/2007/nov2007/bank-n29.shtml>http://www.wsws.org/articles/2007/nov2007/bank-n29.shtml 
>
>
>Citigroup deal highlights US banking crisis
>
>By Joe Kay
>
>29 November 2007
>
>Use this version to print | Send this link by email | Email the author
>
>On Monday, US banking giant Citigroup announced 
>a deal with Abu Dhabi to secure a $7.5 billion 
>cash infusion. The arrangement is intended to 
>shore up the bank’s financing amidst an ongoing 
>credit crisis, but the desperate character of 
>the deal is an indication of the deep crisis facing American capitalism.
>
>Citigroup—the largest US bank and the largest 
>corporation in the world measured by assets—has 
>been particularly hard hit by the deflation of 
>the US housing market, which has called into 
>question the value of hundreds of billions of 
>dollars in mortgages and securities.
>
>Certain basic measurements of the bank’s 
>financial health have fallen sharply in recent 
>months—in particular its capital ratio, 
>representing the amount of assets the bank has 
>relative to its liabilities. To provide a 
>temporary bandage for this problem, the bank 
>arranged the deal with the Abu Dhabi Investment 
>Authority (ADIA), a state institution of Abu 
>Dhabi, the capital of the United Arab Emirates.
>
>The structure of the deal is unfavorable for 
>Citigroup. The $7.5 billion will be exchanged 
>for equity units convertible into shares in the 
>company within the next four years. Until the 
>conversion time, Citigroup has agreed to pay out 
>an interest rate of 11 percent annually—which 
>exceeds the average rate for junk bonds in the 
>United States. At the end of the period, ADIA 
>will be the largest single shareholder of 
>Citigroup, with up to 4.9 percent ownership.
>
>In effect, the arrangement amounts to a $7.5 
>billion loan at an interest rate of 11 percent. 
>The principle will be converted into Citigroup 
>stock at a price only slightly above its recent 
>record-low. If the stock price rises, ADIA can 
>make money on the difference between its purchase price and the market price.
>
>ADIA’s share of Citigroup will exceed that of 
>the current largest shareholder, Prince Al 
>Waleed bin Talal of Saudi Arabia, who purchased 
>3.6 percent of the company at the time of its 
>last major financial crisis, in 1991.
>
>At the same time, the funding is not enough to 
>cover the bank’s enormous obligations. CIBC 
>World Markets analyst Meredith Whitney, who has 
>raised questions about Citigroup’s financial 
>health, told the British newspaper, The 
>Telegraph, “They’re desperate. This $7.5 billion 
>is just not enough money by a long shot.”
>
>The deal was carefully structured so that it 
>would be accounted neither as a bond—which would 
>not have solved the problem of the bank’s 
>capital ratio—or a stock sale—which would have 
>led to a dilution of the company’s share value.
>
>Citigroup’s search for cash has been made 
>necessary by the loss of tens of billions of 
>dollars by affiliated but off-balance-sheet 
>investment entities. These entities include 
>structured investment vehicles (SIVs), 
>collateralized debt obligations (CDOs) and 
>conduits. Each of these is important in 
>different ways, but they are all invested 
>heavily in subprime and other home mortgage 
>securities, which have lost much of their value in recent months.
>
>Among US banks, Citigroup has most heavily 
>employed SIVs, CDOs, and conduits to gamble on 
>the housing market. The collapse of the housing 
>market has begun to unravel the highly 
>speculative arrangements that were designed to 
>disguise the amount of risk that the bank had 
>taken on. Citigroup has already been forced to 
>write-down $6.8 billion in housing-related 
>losses and is expected to write-down $8 billion 
>to $11 billion in the fourth quarter.
>
>This is likely only a small part of Citigroup’s 
>problems. The bank has tens of billions more on 
>off-balance-sheet entities that are nominally 
>independent but are in fact closely tied to the 
>bank. This includes $83 billion in seven SIVs, 
>$41 billion in CDOs, and $73 billion in 
>conduits. Citi is also expected to announce tens 
>of thousands of job losses as a result of its financial woes.
>
>The continued existence of Citigroup as an 
>independent entity is in some question. There 
>have been some rumors of a possible merger offer 
>from Bank of America, which is facing its own 
>severe credit problems. Some investors have 
>called for the bank to be dismantled.
>
>Since the credit crisis began several months 
>ago, several banks have moved to absorb their 
>off-balance-sheet entities. Citigroup has so far 
>resisted, however, due to its increasingly precarious financial position.
>
>In October, Citigroup, along with JP Morgan 
>Chase and Bank of America, worked out an 
>arrangement under the direction of the US 
>Treasury Department, to create a special fund 
>that would buy up assets owned by SIVs to 
>prevent them from becoming insolvent. The 
>establishment of the “super-SIV” was intended to 
>allow the banks to avoid any immediate reckoning with the losses involved.
>
>However, the success of this venture is 
>doubtful, since many investors and banks have 
>balked at supporting it. The deal with Abu Dhabi 
>is another attempt to avoid acknowledging the extent of Citigroup’s losses.
>
>ADIA is the world’s largest “sovereign wealth 
>fund”—investment funds run by states, 
>particularly the oil-rich states of the Middle 
>East. The fund has begun investing more actively 
>in US businesses, while it had previously 
>concentrated on “emerging” markets. An 
>ADIA-related fund recently purchased a 
>significant portion of the private equity firm, 
>Carlyle Group, which is closely connected with 
>the US political establishment. The funds used 
>to invest are largely recycled 
>petrodollars—surpluses from the export of oil, 
>the price of which has risen sharply.
>
>Fortune magazine writer Peter Eavis, in an 
>article published November 7 (“Does Citi have a 
>capital crisis?”) pointed to some of the 
>underlying problems confronting the bank. In 
>particular, Citigroup’s capital levels have 
>fallen sharply. Citi’s “tier 1” ratio, a 
>standard measure of a company’s cushion to 
>absorb losses, was at 7.3 percent of assets at 
>the end of the third quarter of this year, down 
>from 8.6 percent at the beginning of 2006. It is 
>likely that it has continued to fall over the past two months.
>
>Citigroup’s “tangible capital to tangible 
>equity”—considered by many analysts to be a more 
>reliable measure of financial health—has fallen 
>to 2.8 percent, from 4.3 percent at start of 2006.
>
>In addition to the immediate problem associated 
>with its off-balance-sheet entities, Citigroup 
>also faces future losses from sharp increases in 
>defaults on credit cards and other forms of 
>debt, as the American worker and consumer faces increasingly hard times.
>
>The troubles faced by Citigroup are linked to 
>the enormous expansion of speculation by US 
>banks. This speculation has been encouraged by 
>the deregulation of the financial sector, 
>including the repeal of the Depression-era 
>Glass-Steagall Act in 1999. The repeal, carried 
>out under the Clinton administration, broke down 
>the wall between investment and commercial 
>banking. This made conglomerates such as 
>Citigroup possible, and encouraged the closer 
>integration of the banking system with Wall Street.
>
>The problems facing Citigroup are a more 
>concentrated expression of problems facing the 
>entire American banking system. In an article 
>published in the Financial Times on Tuesday 
>(“Why banking is an accident waiting to 
>happen”), columnist Martin Wolf notes that banks 
>have devised many ways to get around government 
>regulations on capitalization ratios. “The 
>result of this ingenuity [on the part of banks] 
>includes ‘special purpose vehicles,’ [including 
>SIVs and the like] hedge funds and even, in some 
>respects, private equity funds. These are all, 
>in varying ways, off-balance-sheet banks: ways 
>to exploit the exceptionally profitable 
>opportunities (and corresponding risks) created 
>by high leverage and maturity transformation.”
>
>These mechanisms were the vehicles for making a 
>great deal of money for a small layer of 
>executives and investors, profiting off the 
>parasitic extraction of wealth from the working 
>population as a whole, including its poorest 
>sections. The process worked fine as long as the 
>housing market continued to go up, but as the 
>market deflates, they are all beginning to unwind.
>
>--
>Peter Myers, 381 Goodwood Rd, Childers 4660, Australia ph +61 7 41262296
><http://users.cyberone.com.au/myers>http://users.cyberone.com.au/myers 
>Mirror: 
><http://mailstar.net/index.html>http://mailstar.net/index.html 
>I use the old Mac OS; being incompatible, it 
>cannot run Windows viruses or transmit them to 
>you. If my mail does not arrive, or yours 
>bounces, please ring me: this helps beat 
>sabotage. To unsubscribe, reply with 
>"unsubscribe" in the subject line; allow 1 day.
>
>======================================================================================================================== 
></blockquote></x-html>


Don Eichelberger
DJ Fix Independent Productions

Green Uprising Blog
www.greenuprising.blogspot.com

My You Tube

http://www.youtube.com/watch?v=ctRp5rGJoUc
http://www.youtube.com/watch?v=iySwwyZfDgE
http://www.youtube.com/watch?v=8r9rK8nPREA
http://www.youtube.com/watch?v=u5UbnJ0kUqo
http://www.youtube.com/watch?v=4SktIYTyC1U

Donny Fix del.icio.us book marks
http://del.icio.us/donnyfix

The Hegelian/Marxist goal is emancipation.  Marx said it best in 1843:

"Human emancipation wll only be complete when the 
real, individual man (sic) is absorbed into 
himself the abstract citizen; when as an 
individual man, in his every day life, in his 
work and in his relationships, he has become a 
species-being (politically accountabe to the 
whole); and when he recognizes and realizes his 
own power as social powers, so that he no  longer 
separates this social power from himself as political power."