Citi Gets It Done

by Steven M. Cohen  •  Jan 10, 2008 at 7:57 am

http://www.buyselljump.com/2008/01/citi-gets-it-done

It's doubtful whether anyone at Citigroup will appreciate the irony of what was either a coincidence or an editorial act of playful malice aforethought in today's Wall Street Journal.

At the bottom of page A11, most of which contained the carryover from a Page One story, Citi ran a paid advertisement in a handsome box in the lower righthand corner of the page.

The story, the main feature article on the front page, is entitled "Citigroup, Merrill Lynch Seek More Foreign Capital." It describes in great length how these two mammoth institutions, cornerstones of the American investment landscape, are making the rounds of foreign investors, "hat in hand," in a desperate effort to shore up their capital in the face of mammoth mortage-related losses.

Most of these targeted investors are so-called "sovereign funds," vast pools of investment capital set up by foreign governments. Much of it comes from the Middle East, in effect an odd repatriation of our own petrodollars.

Both Merrill and Citi have already availed themselves of this source of funds as they seek to recapitalize in the aftermath of the mortgage-backed securities fiasco. The WSJ article suggests what is now too predictable--additional huge writedowns right around the corner--and the possible regulatory issues raised by these foreign investments.

The aforementioned Citi advertisement enthuses as follows: "Congratulations to our newly appointed Managing Directors in Risk Management and Compliance."

Well, it's about time Citi appointed some risk management directors. Reading today's article would suggest that these are newly created-posts, heretofore unoccupied by even a single Citi employee. It sounds like a pretty good idea for Citi to get some folks on the case insofar as risk is concerned, now that its losses are likely to be in the tens of billions of dollars and its stock price has been halved.

Citi will get its investment capital and is likely to shore up its books. As usual, shareholders, whose equity is repeatedly diluted by these kinds of emergency investments, will be left holding the bag. They are not amused.

But at least the WSJ has a sense of humor.

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