Monday, June 26, 2017


There is actually stuff bubbling up about which I can write!  Stress tests, for example.  Everybody passed with flying colors!  At least the quantitative portion which everybody passed except when Big Danny was the self-appointed risk maven and he hated Citibank.  Still have the qualitative portion to go but I suspect that with the new sheriffs in town we are not going to see much action there either.  Except for...perhaps..Wells Fargo.  Hell, why not.  Pile on.  They're too dumb to worry about, but of course it's the wrong forum.

All of this is a big yawn for me of course as is most of the safety mechanisms touted as being reason the system is sooooo much safer today.  Another reason might be that those business lines about which there was so much concern have shifted to the non-banking sector...the very much under regulated sector I might add...but why repeat myself.  However, test results such as this do raise some interesting issues as it is based on these results --and other criteria--that regulators decide the amount of capital, if any, can be returned to investors.  Anyone say "Citibank?"

Back in 2008 you could have bought a share of Citigroup for about $3 a share.  I did.  I mean, too big to fail, right? Well I got my money back...last year.  Didn't make much in the meantime as Citi didn't pay a dividend for a year, but with the management of Mike & Mike, they did begin to make money, clean up an unbelievable mess and grow capital.  They really grew capital to a point where their return on capital was awful.  Could they have done better? Probably.  Are they over capitalized?  Although it's impossible to know what a bank really looks like unless you are inside of it, undoubtably.   But because of the low investment returns, clearly required in past years, the continued non recognition of the investor base by both regulators and the market not only penalizes Citigroup investors...ME...but I would argue that the continuing questioning does no good for an industry as a whole which, even to this day, is really only as strong as it's weakest member.  Ok, that may be a bit much and it is not the regulator's job to look after poor'ol Charlie, but Citibank is not the Last National Bank of Boot Hill.  It counts.  I think it's good to think about these things.

Tomorrow The Regulators Euro and La Bell' Italia.  You can't make this stuff up.

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