Citi’s incompetence

Another must read entry by Mike Shedlock

A nugget:

” Debt Guarantees

Debt guarantees are another piece of the puzzle. Flashback February 4, 2009 Triage For Troubled Assets.

In November, the government agreed to limit Citigroup’s losses on a portfolio of $301 billion of troubled assets. Last month, the government issued a similar guarantee to Bank of America covering $118 billion in troubled assets. In both cases, the companies agreed to absorb an initial increment of losses — about $30 billion for Citigroup and $10 billion for Bank of America — with the government absorbing 90 percent of any subsequent losses.

When taxpayers are guaranteeing 90% of the losses above $30 billion, a figure that was no doubt reached months ago, there is only a 10% incentive to do a job well.”


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