The Bankwatch

Tracking the consumer evolution of financial services

Incredibly … Citibank was ‘surprised’ by credit problems

I read, listen and watch as much as anyone, yet the credit crisis caught me off guard, and not until Aug 2007 did I write about it here.  In fact even I was looking at this from a far too narrow perspective in retrospect.

Back to basics and the promise of social lending | bankwatch

Social Lending by definition carries the promise of at least eliminating the problem that the financial markets experienced this week. A promise of a simpler financial process, one that is easily understood and explainable. It won’t replace the worlds capital markets, but if it can provide at least a small alternative to those who choose, then mission accomplished.

However when I read this following story today, I can only express incredulity.  As poorly prepared as this poor blogger was, it turns out I was still a month ahead of the chair and a director of Citibank. 

They are either lying or stupid.  There is no in-between – take your pick.

Citi’s ex-grandees strain to keep cool | ft

However, the two men’s assertion that the first time they knew Citi had billions of dollars of CDOs on its books was in September 2007 – when they began a series of nightly calls that became known as “defcon calls” – came under scrutiny.

Mr Angelides pointed to internal documents that appeared to contradict Citi’s assertion – in an analysts’ call in October 2007 – that its exposure to CDOs was $13bn.

If anyone remains in doubt, then check the stats in this bankwatch post.  This was public information by the time I got it.

This post was September 2007.  Note that month 1 on this chart is Jan 2007 so it highlighted the problem to be precipitated between the peak period SubPrime ARM resets of September 2007 through May 2008 (grey bars).  This nails the problem to September 2008 quite precisely. 

Bank shareholders need to ask better questions of their Chairman and boards methinks.  Do not get overwhelmed by those excessive dividend payouts.  They know and if they do not they are asking the wrong questions.

Written by Colin Henderson

April 8, 2010 at 23:37

Posted in Banking Strategy

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