Felix Salmon (FS) also kicks RR in the keesta at Portfolio, 29 November 2008, linking to other blogs: http://www.portfolio.com/views/blogs/market-movers/2008/11/29/rubins-teflon-finally-wears-off?tid=true.
"When Citigroup was formed a decade ago, in a merger that reshaped banking, the deal's architect, Sandy Weill, basked in the limelight and admitted to feeling like a rock star. The boss these days, Vikram Pandit, must feel more like a busker. ... The deal, a new version of intervention in a crisis that has already seen a few, is the strongest sign yet that the government will do whatever it takes to maintain confidence in banks, says Torsten Slok, an economist at Deutsche Bank. ... But the plan, crafted in a hurry over a weekend, has several flaws. ... First, no one has been forced to take responsibility for Citi's woes. ... Robert Rubin, formerly head of [board] executive committee ... encouraged its disastrous foray into collateralised-debt obligations. ... Last, the rescue does nothing to establish a clearing price for the impaired assets on banks' books. ... The bank has been heavily involved in most of the past quarter-century's nastiest blow-ups, from the sovereign-debt defaults of the 1980s, to the dotcom bust", my emphasis, Economist, 27 November 2008, link: http://www.economist.com/finance/PrinterFriendly.cfm?story_id=12689930.
"Banks and brokers spent the past few years producing the financial equivalent of the Edsel, one of the biggest flops in automotive history. ... The crisis has shown that banks' basic business model has come undone, that their cost structures no longer reflect reality and that they are still in need of capital. ... For their part, banks have found lots of causes for their predicament aside from their own failings. The crisis, they have argued, is down to an impossible-to-predict perfect storm, predatory hedge funds, panicked investors, unrealistic accounting rules and economic changes that emerged so quickly there was no way to be prepared for them. If only. The reality is the crisis is due to bad lending and investment decisions. And those, after all, form the core of the banking business. ... Banks need to adjust inventive structures so bad lending decisions aren't as likely, slim costs to reflect reduced future profitability and rethink capital", David Reilly (DR) at the WSJ, 1 December 2008.
"Vikram Pandit of Citigroup says: We have gone from arm's length, free-market, just-in-time availability' of funding to a system where big credit-reliant businesses now only have one place to turn, government", Holman Jenkins at the WSJ, 3 December 2008.
"The Federal Reserve said it doesn't expect any losses on its portion of the rescue of Citigroup or on a $200 billion program to support consumer and small-business loans, partly because other agencies are taking the first losses", Scott Lanman at the Houston Chronicle, 3 December 2008.
"After having a direct role in the most serious financial crisis since the Great Depression and after witnessing the near collapse of Citigroup Inc., Mr. Rubin has the audacity to say, 'Nobody was prepared for this.' Thank goodness he wasn't a director at Bank of America, Wells Fargo or J.P. Morgan. They seemed prepared for this", Warren Meretsky letter to the WSJ, 6 Deecember 2008.
Mish, YS, FS and others have collectively put RR down for the count. I can add nothing. By not kicking RR, I disproved "Durante's Conjecture" after 54 years earning the Abel Prize. Jimmy Durante (1893-1980) on The Jimmy Durante Show, 1954-57, used to say as wagging his famous "schnoz", "Everybody wants to get into the act". Well, maybe not this one!
The Economist is confused on one point: the latest Citigroup bailout not "establish[ing] a clearing price for the impaired assets on banks' books" is no weakness of the plan, but part of its design.
DR has this knocked. DR's "parade of horribles", reminded me of the Bible's Moses and Pharaoh. The Egyptians received ten plagues: blood, frogs, gnats, flies and beasts, pestilence, boils, hail, locusts, darkness and the slaying of the first-born; Exodus 7-11. Would they befall our bankers. Moses, in Andrew Jackson's absence, we need you. Lead us to the promised land, a land: free of banker-induced serfdom, with no central bank. Instead we are the victims of ten plagues: Citigroup, GSG, Morgan Stanley, AIG, Bear Stearns, Freddie, Fannie, Wachovia, Countrywide and Indymac. Woe to us!
Think about Pandit's statement. Citigroup used "just-in-time" financing. That's totally reckless! We criticize Joe Schmoe for not having any savings, why is Citigroup not similarly castigated? This monstrosity should be killed.
Assuming the Fed isn't lying, this means the taxpayers will bear Citigroup's losses through some entity other than the Fed. The Fed's refusal to detail what assets it recently acquired may be due to its reluctance to disclose they are worthless and the Fed insolvent.
I hope Meretsky's letter doesn't give any of these other banks any ideas.