this is an obscenity on so many levels…
Saudi Prince Al-Waleed bin Talal, the single largest shareholder of Citigroup, says:
Citigroup, went – the price went – down to a very unreasonable price lately. It still was on very solid grounds..
On very solid grounds?? Is he insane?! Of course, this is why they got a $300 billion bailout today. It’s clearly a reward for their long history of stability.. this is a farce of epic proportions.
Citigroup is a credit card company which got into trouble with derivatives speculation and is now feeling the wrath of negative leverage. This is a corporation who could borrow and the Fed’s prime lending rate and charge working people 19-36% on credit cards. This is a can’t lose business as long as you don’t get greedy and get wrapped up in too much leverage… They got greedy. They lost. Plain and simple. We should not be bailing out bad gamblers.
But wait, there’s more. Al-Waleed also talks about Oil speculation:
..no doubt the the price of oil will go up. But I hope this time it will go up in a very steady manner without the speculative element that makes it go to the triple digits in a manner of months. So we in Saudi Arabia we’re against having these big jumps because our interest, as a producer in Saudi Arabia, very much coincides with the interests of the OECD countries and the west and especially the United States.
So Al-Waleed does us a service by confirming that the speculation of Goldman Sachs is the main cause of oil prices jumping up to $143/barrel in June 2008.
Thank you, Mr. Al-Waleed.
Now, some background.
Citigroup violates the Glass-Steagall Act, from wiki:
On April 6, 1998, the merger between Citicorp and Travelers Group was announced to the world, creating a $140 billion firm with assets of almost $700 billion. The deal would enable Travelers to market mutual funds and insurance to Citicorp’s retail customers while giving the banking divisions access to an expanded client base of investors and insurance buyers.
[...]
The remaining provisions of the Glass-Steagall Act – enacted following the Great Depression – forbade banks to merge with insurance underwriters, and meant Citigroup had between two and five years to divest any prohibited assets. However, Weill stated at the time of the merger that they believed “that over that time the legislation will change…we have had enough discussions to believe this will not be a problem”. Indeed, the passing of the Gramm-Leach-Bliley Act in November 1999 vindicated Reed and Weill’s views, opening the door to financial services conglomerates offering a mix of commercial banking, investment banking, insurance underwriting and brokerage.
And it gets worse..
Very heavy exposure to toxic mortgages in the forms of Collateralized debt obligation (CDO’s), compounded by poor risk management led Citigroup into trouble as the subprime mortgage crisis in 2008. The company had used elaborate mathematical risk models which looked at mortgages in particular geographical areas, but never included the possibility of a national housing downturn, or the prospect that millions of mortgage holders would default on their mortgages. As the crisis began to unfold, Citigroup announced on April 11, 2007 that it would eliminate 17,000 jobs, or about 5 percent of its workforce, in a broad restructuring designed to cut costs and bolster its long underperforming stock. Even after securities and brokerage firm Bear Stearns ran into serious trouble in summer 2007, Citigroup decided the possibility of trouble with its CDO’s was so tiny (less than 1/100 of 1%) that they excluded them from their risk analysis.
So I guess the World Financial Crisis we’re seeing now is simply a Perfect Storm of bad luck then.
With the crisis worsening, Citigroup announced on January 7, 2008 that it was considering cutting another 5 percent to 10 percent of its work force, which totaled 327,000.
By November of 2008, the crisis hit Citigroup with full force, despite its receipt of $25 billion in federal TARP bailout money, and on November 17, 2008 Citigroup announced plans for about 52,000 new job cuts, on top of 23,000 cuts already made during 2008 in a huge job cull resulting from four quarters of consecutive losses and reports that it was unlikely to be in profit again before 2010. Many senior executives were fired but Wall Street responded by dropping its stock market value to $21 billion, down from $244 billion two years prior. As a result, Citigroup and Federal regulators negotiated a plan to stabilize the company and forestall a further deterioration in the companies value. The arrangement calls for the government to back about $306 billion in loans and securities and directly invest about $20 billion in the company. The plan was approved late in the evening on November 23, 2008. A joint statement by the Treasury Department, the Federal Reserve and the Federal Deposit Insurance Corp announced: “With these transactions, the U.S. government is taking the actions necessary to strengthen the financial system and protect U.S. taxpayers and the U.S. economy.”
Citigroup in late 2008 holds $20 billion of mortgage-linked securities, most of which have been marked down to between 21 cents and 41 cents on the dollar, and has billions of dollars of buyout and corporate loans. It faces a potential massive losses on auto, mortgage and credit card loans if the economy worsens.
With a $306 billion cushion, they must be expecting the economy to get much worse.
By November of 2008, the ongoing crisis hit Citigroup hard and despite federal TARP bailout money, the company announced further cuts. Its stock market value dropped to $21 billion, down from $244 billion two years prior. As a result, Citigroup and Federal regulators negotiated a plan to stabilize the company. Its single largest shareholder is Prince Al-Waleed bin Talal of Saudi Arabia, who has a 4.9% stake. Vikram Pandit is Citigroup’s current CEO, while Sir Win Bischoff the current chairman.
some background on Mr. Al-Waleed:
Prince Al-Walid bin Talal bin Abdul Aziz Al Saud is a member of the Saudi Royal Family, and an entrepreneur and international investor. He has amassed his fortune through investments in real estate and the stock market. As of 2007, his net worth is estimated at US$29.5 billion, according to the Arabian Business rich list published December 2, 2007. He is ranked by Forbes as the 20th richest person in the world, and is the second richest man in royalty next to the Sultan of Brunei. He has been nicknamed by Time magazine as the Arabian Warren Buffett.
Yep, this guy needs a bailout…
The Economist has expressed doubts about the source of income of Prince Al Waleed and whether he is a front man for other Saudi investors. According to it, he has not earned enough income from his investments to pay for all that he has spent in the 1990s. The mystery goes back to that first stake in Citicorp. The prince has declared that this money came entirely from his personal funds. He says he started out in 1979 with a loan of just $30,000 from his father. He also mortgaged a house that his father had given him, raising approximately $400,000. And each month, as a grandson of Ibn Saud, he receives $15,000. “You could barely clothe a Saudi prince for such sums, let alone furnish him with a multi-billion-dollar empire. Nevertheless, by 1991 Prince Alwaleed had felt able to risk an investment of $797m in Citicorp”, writes the newspaper.
He even owns Donald Trump’s “old” yacht:
Al-Walid now owns the yacht Kingdom 5KR, which is the 282′ yacht originally built as the “Nabila” for Saudi billionaire, Adnan Khashoggi. She subsequently posed as the Disco, the yacht of James Bond villain Largo in the film Never Say Never Again. The yacht was later sold to Donald Trump, who renamed it Trump Princess. Al-Walid bought the yacht after Trump’s second bankruptcy.
He has ordered a new yacht currently known as the New Kingdom 5KR which will be about 170m long and will cost $500+ million. The yacht is rendered by Lindsay designs and is expected to be delivered in 2009.
He owns 300 cars and has been rumored to own a diamond-covered Mercedes SL600 worth an estimated $4.8 million. This, however, is a popular hoax email that has been circulating the internet since 2006 in different forms.
At the 2007 Dubai Airshow, Airbus confirmed that Al-Walid, already owner of a Boeing 747 jet converted to private use, had ordered an Airbus A380, the world’s largest passenger aircraft. Outfitted for private use, the aircraft is to be delivered in 2010.
Al-Waleed and his children live in a $100 million sand-colored palace whose 317 rooms are adorned with 1,500 tons of Italian marble, silk oriental carpets, gold-plated faucets and 250 TV sets. It will have four kitchens, for Lebanese, Arabic, Continental and Asian cuisines, and a fifth just for dishing up desserts, run by chefs who can feed 2,000 people on an hour’s notice. Their royal highnesses can swim in a lagoon-shaped pool, or catch a film in the 45-seat basement cinema.
Prince Al-Waleed also owns a 317-room palace in Riyadh where most of his guests come to visit him.
Is this someone who needs a US Gov’t bailout? This is an obscenity. Al-Waleed is the poster child for opulent dumb wealth.
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