Citi Proposing A Good Bank-Bad Bank Structure: Baloney!

They never taught us about the “Good bank-Bad Bank” structure in B-School.  I guess that it really wasn’t quite relevant - at the time.  Anyway, I’m reading about Citibank’s (C) new “Good/Bad Bank structure” which is being sold to the public.  (See WSJ article snip below);

I really almost laugh out loud when I read this. The “unwanted” part of the businesses is segregated into a separate entity.  How can you just take the part of the business you don’t want and dump it into a separate entity? Boy, I think I’ll take all my debt and crap assets and put them into one entity.  I’ll put all the good stuff in the other entity.  When we report earnings, we’ll report that the good entity earned $10/share and the bad entity lost $20/share.  We’ll then make some remarks about how the $20/losses don’t really count. Management is real good at spinning that; they’ll claim they have a buyer lined up.  They’ll suggest that there’s really a lot of hidden value in the crap assets in the bad entity.  In the end, a loss is a loss.  No two ways to get around it.  Say what you will - hide it, dress it up, disguise it.  A pig is a pig!

This is a great line too: “People familiar with the matter…” Who’s are these “people familiar with the matter”? Are they CEOs, employees, the janitor of the downtown Manhattan branch? Come on. It’s so obvious that this is spin.  At least do a better job of trying to spin it! “People familiar…” are just imaginary people that Citibank, in conjunction with the WSJ are using to spin the article.

They’re trying to hide the fact that Citigroup made some real bad financial mistakes - mistakes that were so bad, they will most likely hurt the balance sheet and income statement for a long long time.  In fact the mistakes made in running the business were so bad, that they need to be hidden from plain view.  You see when you hide the mistakes in some other “entity”, you’re really trying to disguise the problem.  The problem is that earnings are overshadowed by losses that just seem to keep on coming.  Those losses just happen to keep offsetting any profits that the bank is able to squeak out.

How about this: “Such changes would be largely cosmetic”.   Pffffffft…..HA HA HA!!!  Come on, how are these changes going to be cosmetic.  It sounds like Citigroup is going into the cosmetic counter to get some new makeup - perhaps a new base, some rouge, a little mascara and voila!

“The new structure will make it easier to showcase the company’s strengths”. Unbelievable.  You know how the strengths can be showcased? By hiding or disguising the losses.  Dishonesty - lack of transparency. Haven’t these banks learned their lessons already.  Don’t they understand that it’s better to bite the bullet. Take one for the team now; write it off!  Don’t hide it.

Boy, they must think Americans are really stupid or something.

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