Does this plan solve Citis problems?
This does nothing more than temper the problem, but, no, it hasn’t solved anything. We have three main issues to deal with at Citi. The first two are the operational issues and obvious losses that are well known and that the bank and Wall Street have been grappling with for years. The third is the potential for huge losses on off-balance sheet assets that we can’t see. We will see that no one will trust the situation at Citi because of these huge question marks that still remain. How does this rescue plan differ from the other bailouts we’ve seen in the past few months? The accurate term for what the government has done is “open bank assistance.” It’s similar to what the FDIC had to do when it was clear that Wachovia could no longer go on, except there is not a ready buyer in this case. The other big financial institutions have had parties willing to pick up the assets, but you won’t see that with Citi. This bailout is more like a resolution. That means that the government essentially
