Remember the good old days when $25 billion was enough money to keep the wolves from your door for at least a couple of months? Well $25 billion doesn’t stretch the way it used to especially when you are a global bank with operations around the world and you are too busy to keep account of your exposures to the various new fangled financial instruments that have been all the rage.
The people at the Federal Reserve and Treasury Department are understanding folks though and what is a few hundred billion dollars of protection among friends. So on Sunday, these angels of the banking community passed out another $20 billion to Citigroup—on top of the $25 billion Citi received in October from the Troubled Asset Protection Program (TARP) and agreed to back $306 billion in questionable debt held by Citi.
The scary part—if things can get any scarier—is that many are questioning whether it will be enough. Time is reporting that Citi has an additional $1 trillion worth of exposure off of its books “kept in entities somewhat removed from the company. These assets could be problematic if the economy grows worse.”
If? The if, I thought, has already been answered.
As the additional bailout of Citi was being discussed on Monday, Bloomberg did a little math and reported that the total amount of taxpayer money the government is prepared to extend to keep the balls in the air could reach $7.76 trillion.
Perhaps most troubling is that the Federal Deposit Insurance Corporation (FDIC) has skin in the game as well. With the FDIC backing part of the toxic credit inherent in the this banking solvency crisis, I wonder who will be at the front and who will be at the back of the line when the music stops for some of these troubled banks. It is a question that needs to be asked seeing that the main function of the FDIC is to guarantee individual banking deposits. Perhaps the answer is that as long as there are printing presses, money is an infinite commodity.
