We were one of the first to say that former Citigroup Charles Prince would come to regret his end-of-the-cycle-is-nigh comment initially reported in the Financial Times:
Chuck Prince on Monday dismissed fears that the music was about to stop for the cheap credit-fuelled buy-out boom, saying Citigroup was “still dancing.”
We are so bold as to predict that another quote will come back to haunt its source. From the Wall Street Journal’s Economics Blog:
Following the U.K.’s surprise move to nationalize mortgage lender Northern Rock, will the U.S. need to make similar moves?
“Absolutely not,” U.S. Treasury Secretary Henry Paulson told CNBC, dismissing talk that the Bush administration needs to initiate a widespread bailout program to assist the financial industry and restore investor confidence.
I agree. Further, I think nationalization plans are being bandied about right now. Paulson’s statement is just part of the Treasury’s disinformation campaign to confuse the public.
Will it be Citi or a regional that’s gotten in over its head? WaMu? Or will there be an orchestrated dump of impaired assets by dozens/hundreds of institutions into the GSE’s, for the government to nationalise?
We’ve already had a rescue of Countrywide, a bank that should have been allowed to fail, that while private sector, I suspect benefitted from some nudging by the regulators. And its use of the Federal Home Loan Banks was also a bit sus.
My guess (just a guess) is that it will be a Wall Street firm. We have the leveraged loan mess hitting and the collateral damage of whatever happens with the monoline guarantees of structured paper. Of course, then you can argue it wasn’t a bank, and it may not take the form of a cash infusion. Remember the Chrysler bailout. The US guaranteed a bond issue.
Just like Paulson’s “Strong Dollar Policy.”
The things you could hide with a state secrets privilege …
to your post above: and the world won’t need quite so many IB’s going forward since ‘structured finance’ as we know it will be obliterated at least for a generation. Hmm, does it rhyme with ‘inch’?
reuters is out with a story saying the Treasury is contemplating a full scale bailout of the mortgage sector including resturcturing mortgage terms…the hope now alliance is just a warm up to what they will eventually have to do. If leverage loans are the issue that will sink anyone it will be GS and/ C, more likley the later. The two have the heaviest exposure.
Also, when are we going to see the fish kill in the hedge space transpire, can’t be long now…