Money for Nothing

A commenter mentioned in passing the news over at Citigroup: the ouster of CEO Chuck Prince and its general Titanic-ing. It's not strictly "politics in the nation's capital," but since subprime mortgages and foreign ownership of key American assets (Saudi Prince Alwaleed bin Talal is the largest individual investor in Citigroup and was until recently a Prince -- ha! -- supporter) are hot button topics this cycle, I am especially appreciative that Time has Justin Fox on the case to make sense of it all with two fascinating posts:

On it getting worse before it gets worse:

Most big companies, when they run into a patch of trouble, will eventually adopt what's known as the kitchen-sink approach, where they write down the value of every possible asset in hopes of getting a nice fresh start. Citi seems to have been (and may still be) afraid of doing that, possibly because of concerns about its capital ratios, possibly because it is afraid its writedowns could snowball into an even worse meltdown of the market for subprime mortgage securities.

And a nice nugget from a commenter (we all listen! we all care!):

You may recall that Prince got the job when Citi was reeling from one legal scandal after another, which was not a Weill forte. If the trend continues, the next CEO will be good at sorting out subprime mess but inept at whatever skill sets the next crisis demands.

William Grieder at the Nation also has some thoughts on why the fall of Citigroup is exactly "politics in the nation's capital":

The creation of Citigroup as an all-purpose financial supermarket and too-big-to-fail banking marvel was very much the accomplishment of Clinton Democrats. They enacted the law in the late 1990s that authorized this megabank monstrosity, with coaching from Treasury Secretary Robert Rubin, Fed chairman Alan Greenspan and of course Sanford Weill, the creative genius who built Citi.

[snip]

Actually, the combination of insurance, investment banking and old-line commercial banks [made possible by Bill Clinton "delivering" the repeal of the Glass-Steagall Act] multiplied the conflicts of interest within banks, despite so-called "firewalls" supposed to keep these activities separate. Much like Enron, placing some deals in off-balance sheet entities did not insulate Citigroup from the losses in its swollen subprime housing lending. The bank has so far written off something like $15 billion and more to come.