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Citigroup and JPMorgan Still at Risk, Says Analyst

Posted Nov 18, 2008 11:27am EST by Henry Blodget in Investing, Newsmakers, Recession, Banking

Now that Citigroup has announced massive costs cuts and been bailed out by taxpayers, the worst is over, right?

Nope, says Christopher Whalen, Managing Director at Institutional Risk Analytics. Citigroup is still hugely exposed to weakening consumer debt, and its loans are going bad at the highest rate in the industry. Thanks to an accounting-rule change, Citi will also be forced to put another $150 billion of "off-balance sheet" debt back on its balance sheet, which will put it in an even more precarious position. Citi will end up needing another cash infusion from the government, Whalen says, and this will dilute existing shareholders.

Nor is Citigroup the only huge bank for which the future is bleak, says Whalen — JPMorgan is next in line. And before the financial crisis is through, taxpayers will have to bail out JPM again, too. (Note: Whalen has no position in Citi or JPMorgan.)

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124 Comments

Yahoo! Finance User
Yahoo! Finance User - Tuesday November 18, 2008 11:38AM EST

We really need to "bailout" Johnny Ike!

stan
stan - Tuesday November 18, 2008 11:40AM EST

Tell us something new we dont know, wake me up when you have some possitive new.......

__A_YAHOO_USER__
__A_YAHOO_USER__ - Tuesday November 18, 2008 11:40AM EST

It will recover in the end of 5 years......Their stock value will accelerate very quick up once a bit of recovery comes.....Good bet .....

Steve
Steve - Tuesday November 18, 2008 11:41AM EST

Some of these "analysts" need to take a serious look at the Basel II system, and why John Dugan, also head of the Joint Forum, felt the need to install this system. Take a look at offshore banking, and it's affect on corporate sweep accounts, AKA the Queen of England

Free Texas 2012
Free Texas 2012 - Tuesday November 18, 2008 11:45AM EST

ABSOLUTELY INCREDIBLE!!! Don't let them fail once, don't let them fail twice.... When does America realize that without failure, there is no sucess.

- Tuesday November 18, 2008 11:46AM EST

I don't think so...........! What we should do as investors, is to stop been afraid and ensure that we build back our confidence and ensure that this 'FINACIAL HURRICANE' can be a thing of the past.

JoshS
JoshS - Tuesday November 18, 2008 11:47AM EST

C, BAC, GS, MS, stay away

Bikram
Bikram - Tuesday November 18, 2008 11:47AM EST

i think he has very succintly drawn the difference between citi and jp morgan.the only thing saving citi today is its international exposure, if that wasn't there the company could just as well be another aig? risk management and over indulgence in derivative business which few onderstood including those managing the business has led to the massive reserves that now have to be created,let alone the credit card securitizations which are yet to show their ugly face.... one can only hope that citi gets through all this mess amicably...to say the least

Yahoo! Finance User
Yahoo! Finance User - Tuesday November 18, 2008 11:49AM EST

Create a $2.5T TARP and bail us all out.

go-get-er
go-get-er - Tuesday November 18, 2008 11:51AM EST

"Whalen has no position in Citi or JPMorgan" But I bet his buddies do; and are most likely short both companies.

madmilker
madmilker - Tuesday November 18, 2008 11:52AM EST

with what Thomas D. Schauf wrote back in 1992 the American people are at risk.....

Yahoo! Finance User
Yahoo! Finance User - Tuesday November 18, 2008 11:53AM EST

I like it. A Failout is better than a Bailout!

Thomas
Thomas - Tuesday November 18, 2008 12:04PM EST

citi is done

BIG D
BIG D - Tuesday November 18, 2008 12:05PM EST

If we are going to use our taxpayer's monies, then why don't they credit everyones credit cards for the individuals who filed a tax return. Give the money directly to the institutions as a pay down and relieve us of this huge credit crunch. Who's money is it anyway? I'm sure someone will say," How you going to account for it?" Well, they seem to be able to account for most everything when it comes to getting a bonus for it, don't they?

G
G - Tuesday November 18, 2008 12:09PM EST

No short position. Then they are all honest people? Who knows?

john
john - Tuesday November 18, 2008 12:10PM EST

I'm a bit perplexed - how do you lay off 50,000 employees but not but 6 weeks ago, you're crying foul at Wells (a better capitalized and product mix bank I might add) for actually tendering an offer for WB in lieu of the "robbery" that C was gonna get from the Fed. So following in this rationale, instead of 50k employees it would have been in excess of 100k if C was allowed to gangster up Wachovia. And with Citi's pending lawsuit against Wells for intruding into this grand theft circus...why would you cut human 'resources' so drastically in advance of making your argument heard as "YOU" were the better capitalized bank to acquire Wachovia. Just don't get it---

Yahoo! Finance User
Yahoo! Finance User - Tuesday November 18, 2008 12:16PM EST

GS is great for day trading....

ANTHONY
ANTHONY - Tuesday November 18, 2008 12:18PM EST

WHAT DID YOU EXPECT ??40 YR S OF SQUANDERING AND TAXING, HAVE LEFT EVERYBODY BROKE,,THE COMPANIES THAT ARE LEFT ARE GOING BROKE.. ALWAYS HAVING A CASH FLOW PROBLEM,BECAUSE OF TAXATION OF ALL TYPES ,TOYOTA IS WORTH 40 TIMES MORE THAN FORD AND GM COMBINED.."AT RISK" EVERY COMPANY/ PERSON THAT IS OVERTAXED IS AT RISK.. AND ALL TAXING ENTITIES.STATE FEDERAL/ LOCAL ARE AT RISK OF "NO TAX COMING IN,,,"IT APPEARS THE HOUSE OF CARDS .IS GOING TO FALL.. THANKS CONGRESS.....

Mark R
Mark R - Tuesday November 18, 2008 12:20PM EST

I will Pay You Tuesday For A Hamburger Today!!!

joej
joej - Tuesday November 18, 2008 12:20PM EST

As soon as housing bottoms and starts up again.......the vast number of American's will again demand trick-dick loans and sneeky convoluted mortgages so as to afford the new housing. fancy pants SUV's, surf boards for the neighborhood, golf platinum memberships and skinny yet busty blondes who masquarde as wives when hubbie is around!!!

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