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$326,000,000,000 TO CITYGROUP. WONDER WHAT THEY'LL DO WITH IT?

* * * * HARD CORE REAL ESTATE TALK * * * *

IT PAYS TO BE BIG. IT PAYS EVEN MORE TO BE VERY BIG. CITIGROUP IS THE BIGGEST AND IT APPEARS THAT THEY GOT THE MOST, SO FAR. . . . .

CASH

$20,000,000,000 CASH TO CITIGROUP.
$306,000,000,000 GUARANTEES TO CITIGROUP.

CITIGROUP'S BAD MORTGAGE-BACKED-SECURITIES PORTFOLIO ARE GUARANTEED AGAINST LOSS - - -LOSS TO CITIGROUP, THAT IS.

THERE IS NO GUARANTEE FOR THE AMERICAN HOME OWNER FOR THEIR LOSS OF HOME VALUE.

THERE IS NO CASH TO THE AMERICAN HOME OWNER TO HELP THEM MAKE THE MORTGAGE PAYMENT ON A HOME THAT IS NOW WORTH ALMOST 1/2 OF WHAT THEY PAID FOR IT.

WHAT DOES THE FUTURE HOLD FOR THE AMERICAN FAMILY? I wonder what our real estate market will look like 5 years from now when most of the ARMs have reset and when many home owners are making payments on mortgages that are 1/2 of their gross monthly income. Wages are increasing at about 3% a year, but unemployment is going up and that should put downward pressure on wages.

With the percentage of the family's morthly gross income going for housing, the family will not be able to follow their financial plan, if they have one. The scenario for the average American family struggling to make their mortgage payments is not a pretty picture.

The college fund will dry up because the parents needed the money for the mortgage payment.
The roof will continue to leak because there's no money to replace it after paying the mortgage payment.
Dad's not home much any more because he needs more overtime to make the mortgage payment.
Mom and Dad are driving 8 and 10 year old autos because they can't get financing on replacements and don't have money left over to save after making the mortgage payment.
There's no money for life insurance for the family after the mortgage payment.
No more payments are made to the 401K because the family has to make the mortgage payment.
Family vacations are not planned because there is no extra money after paying the mortgage.

HOW MUCH MONEY IS LEFT IN A HOUSEHOLD BUDGET WHEN THE MORTGAGE PAYMENTS REQUIRES 39%-45% and 51% OF THE FAMILY GROSS MONTHLY INCOME??

The median income for men is about $45,113 a year.
The median income for women is about $35,102 a year.
The median home price is about $229,100.

When the family purchased their home in 2005, they paid $400,000 for an 15 year old property, their dream home. Their home was priced at the average price for their location for the 2005 real estate market. They qualified for a mortgage loan with 10% down. Their mortgage loan was a 3/3 year ARM starting at 5.5% and resetting to 7.5 in 3 years and then 9.5 in 3 more years. That means that in 2011, their interest rate will be 9.5%. Taxes are about $400 a month and home owner's insurance is about $50 a month.

PI on their $400,000 home in 2005 was about $1,932.
Taxes on their home is about $400 a month.
Home owners insurance is about $50 a month.
MI is about $120 a month.
Their total mortgage payment in 2005 was $2,502, or 39% of their combined family income.

39% of the monthly gross income for a mortgage payment is high. However, this American Family is very thrifty and has saved a 10% down payment, have no car payments for their 4 and 6 year old cars and pay their credit cards off every month. So, with good credit scores, they qualified easily. They anticipated refinancing their mortgage loan prior to reset in 2008.

In 2005, their mortgage payment was $2,502 @5%. Their combined income was $6,400 a month.
In 2008, their mortgage payment went to $2,965 @7%. Their combined income is $6,600 a month.
In 2011, their mortgage payment will go to $3,466 @9%. Their income will be about $6,800 a month.

This anticipates the average rise in income of about 3% a year.

In 2005, this family's mortgage payment was 39% of their monthly gross income.
In 2008, the family's mortgage payment went to 45% of their monthly gross income.
In 2011, the family's mortgage payment will go to about 51% of their monthly gross income.

In 2008, when our family contacted their loan officer about refinancing their home mortgage, they were unable to do so because the market value of their home had fallen to $300,000. The family is now "upside down" and owes more than the value of their home.

WHERE IS THE RELIEF FOR THE AMERICAN HOME OWNER WHO STRUGGLES TO MAKE THEIR PAYMENTS? The mortgage companies are stubbornly clinging to their belief that the American home owner will continue to pay for a home that is worth half what they are paying for. Sooner or later, the American home owner will be bled dry and then another round of foreclosures and short sales will begin. No family with children can continue to make mortgage payments of 45 to 51 percent of their gross monthly income.

SOME EXPENSES ARE MANDATORY. Federal taxes for a family in this income bracket are not high. However, they have Social Security taxes of 7.6% a month. Monthly payments for their share of health insurance is about $200 a month. Groceries for a family of four is increasing every month. Gasoline and maintenance and insurance on their vehicles is about $600 to $800 a month. There is simply no money left in a family budget after making their house payment, if they have a budget. Budgets don't work when the expenses outstrip the income. The family begins to make minimum payments on their credit cards and begins to go deeper in debt each and every month.

This is a typical American home owner who purchased a home in 2005 and is headed for financial disaster.

WHAT IS THE SOLUTION? Until we have a national write-down of mortgage balances, the home owner will not survive. The banks may, buy the home owners will not. As with our hypothetical American family home owner above, folks will continue to go farther and farther in debt. Real estate taxes are likely to increase as towns and cities feel the crunch from loss of property values and the concomitant loss in revenue. family

TRICKLE DOWN ISN'T HELPING THE AVERAGE AMERICAN FAMILY BECAUSE THE BANKS ARE NOT HELPING FAMILIES. THEY ARE HELPING THEMSELVES and THEIR SHAREHOLDERS. Those same shareholders who benifited from the stock value and dividends in 2004, 2005, 2006. IMO, the focus on helping the banks survive has been wrongheaded from the beginning. Those same banks benefited from the housing boom are now benefiting from tax payers and the tax payers are being left in the dust.

This has been the most wrong headed government program I've ever witnessed. It's easily worse than the farm bill, the transportation bill and other government give-aways.

BAIL-OUT TO CITYGROUP FOR GUARANTEES AND CASH - $326,000,000,000.

GOVERNMENT HELP FOR AMERICAN FAMILIES? I seem to recall that there was a "stimulous" program some months ago? I can't recall the details, but for our family above, it would pay for their grocery bill for about a month or two. The stimulous that put money in the hands of the American family was about $300 for a single person or about $600 for a family for about 120,000,000 households.

WHAT'S WRONG WITH THIS PICTURE?

Posted by Lenn Harley, Real Estate Broker, Maryland & Virginia on 11/24/2008 07:51 AM

Comments (55)

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55 Comments on $326,000,000,000 TO CITYGROUP. WONDER WHAT THEY'LL DO WITH IT?

NOV

2008

Amen Lenn! We need to send this to our lawmakers. I have been asked repeatedly - when will the average home owner feel some relief from the bail out... Not one person yet has liked my answer.

Debbie. It's bleak for the average American family.

Lenn, how timely your points are. I was looking at my (remodeled in 2006) kitchen last night, thinking, "What if we had left the kitchen as it was- no dishwasher, and cabinets that had doors falling off". I'd be in this house, worth what we paid (equity is gone) but further depressed because of the habitability factor. Unfortunately, we paid cash, which would have come in handy over the next few years. Being stuck here with that kitchen? Might even compel me to walk away, as others may well be thinking. Not good- not good at all. Not offering tangible help to homeowners, but pissing them off with much talk about using THEIR money to bail out everyone BUT them is not going to bode well, I'm afraid- a mind set may well develop that further deteriorates the market- but can we BLAME the homeowner for that? Hardly.

Lenn, great job putting these numbers into perspective for an "average" homeowner. This should be sent to all of our lawmakers- hopefully before they spend more billions bailing out the Auto industry and more banks.

Very scary, no wonder more and more homeowners will be "walking away" from their homes and leaving them for the banks to keep. The banks need to keep those interest rates down. Don't be so greedy

On a happier note- have a great Thanksgiving! Thanks for all your information this year- and especially your information on the Copyright Rain Radio show.

Laurie. The American home owner is NOT responsible for this mess, but they will, I promise you will pay the bill.

Citibank is screaming that they are holding bad loans.......Citibank holds my mortgage - let me tell you how much risk there is in the loan.

A 15 year loan taken three years ago (not a purchase but a refinance - no cash out - just lowering rate and term) but is now paid down to a less than 10 year loan at a 50% LTV and additional principal payments have been made every month on the loan.

Linda. Thanks for dropping by. I don't see any relief for home owners unless there is a "write-down" of their mortgage balances. Unfortunately, I don't see that happening. The families will not recover as quickly as the banks.

Julie. Smart financial planning on your part. However, you're paying on a home probably worth a lot less than you paid for it. I know I am.

..and Congress was up in arms about loaning the Big 3 25 billion to stay afloat until the new labor contracts and revisions kick in.

I don't know what or whom to believe in anymore.

Citi will not be the last and it won't be the last time for Citi to come to the trough. There are too many "too big to fail" corporations that affect a lot of employment.

I think there is a lot of fluff and a " the government is giving out free money, let's get in line" mentality but there is also a real possibility that dominoes could start to fall initiating massive unemployment that would result in "just regular folks" like us feeling it in a big way.

Yea, what a tragedy. I just don't get it, how many folks do you know that the banks are writing down mortages or converting the ARMS to a fixed. I just don't get it. I just don't get it, I just don't get it.

There I said it.

I think of all those folks I helped buy in 2005 and I worry. You are right, their homes are worth less than what they paid for them. They paid top dollar. Many were first time buyers. Now they are having babies and may have planned to stay home but will have to go back to work instead. We thought we were helping folks achieve the American dream. What if we helped them right into a nightmare?

Lenn, I know that you're right, but part of me says... Can we reallly afford for these HUGE conglomerates to fail. I lay in bed early this morning praying for the many people I know who have terminal illnesses - or a family member with one. Then it occurred to me that I was laying in a warm bed in a warm house, not in some tent city around the country.

Then, of course, I started thinking about our economy and the Great Depression... Can we go there again? I'm with Missy, I don't get it!

Lenn, I hear you - it is crazy... and the craziness keeps going and going and going... Is hard to know what the "right" thing to do is to avoid a collapse. The argument to save these companies is that if they did collapse that would affect all of us that much worse in that home values would decline much more and swiftly and banks would lend less (or none) money for future loans... But on the other side, you are right, individuals are getting zero relief. I wish the answers were more crystal clear per se... It certainly makes one think and ponder...

You are all forgetting something ,In 2005 we ,realtors, were " helping " these poor home owners to buy houses they could not afford.How many of you told potential clients to stay with their parents or keep renting till you have some cash.

Home prices have come down and gone up many times ,remember 1986,1993 in California.The home prices have a tendency to return to the long term trend line.yes some people will now pay a mortgage on a house that is worth less than it was bought for ,but that is the same for many car buyers.

The ARM loans interest rates should come down.I have one that came down a full 1 % in November this year.

if their are loans that have fixed increases independant on the market rates( I did not know of any of these than I agree that banks should reduce those to the present rates and give these home owners a fixed mortgage ,assuming they have the credit rating and income to acually pay for it.

I still believe in personnal responsibility.All these buyers are adults and responsible for their actions,even in the most socialistic states in Europe the government never bailed out irresponsible home buyers or " victoms " of poor timing.

The next thing might be that the 410 K holders might ask for a bailout.Those who are just retiring and now have only 50 % of what they had last year due to the drop in the stock market.

We are be coming a benevolent society where everyone is holding up their hand for money from the government.This is possible but only in some oil rich countries .WE BETTER START DRILLING NOW.

Lenn.... an excellent article... I don't know where to begin, because many of us in the real estate & mortgage industry know what is going on and what will happen in the coming years to current homeowners. A lot of this started with Wall Street getting very greedy in what they allowed as a mortgage. Then the lenders not clamping down on guidelines. ex... there was a mortgage program that was called a stated/stated for W-2'd people. HUH? You mean someone that has a fixed income can put down what ever they want?

On another note, a lot of this mess was from states allowing values to get of hand. You might ask, how is the state at fault? Believe it or not, states can actually control some of this. Look at North Carolina.... for 5 years, from 2000 to 2005, values hardly increased at all. Look at them now... not as many foreclosures and values have not dropped as much.

Overall, you just wonder what the government is thinking.... oh wait, to help out their big pockets, buying votes per se, and worry about friends???? And Missy said it well... And to answer Connie's question? I think we are much closer than what many experts are saying. I wrote about this last week, Inflation vs deflation.

In any case, again, excellent post...

jeff belonger

PS... reading Everard's comment..

@ Everard....You made this comment... "The ARM loans interest rates should come down.I have one that came down a full 1 % in November this year."

You said you had 1.... out of how many? And that is a blanket statement in my opinion. Why do I say this?

Because you have no idea what the arm is based on... may it be the libor index, the cofi index, etc etc.
You also don't know what the margin is. The margin is what the arm can reset up to. For example... if the index is at 6.25 and your margin is at 3.00, then your rate can go up to 9.25%. But it depends on your cap.
Cap - I mentioned this in the previous sentence. This is the total amount of what your rate can increase to. You have a yearly cap and a lifetime cap.

Overall, it comes down to the index, margin, and caps. Again, why I say that your statement is a blanket statement. And why many rates will still increase. I just had a client that has an 11% subprime loan that will still increase.

Lastly.... yes, banks should take charge and fix arms and fix payments... all they are doing is taking a risk that the homeowner will be able to with stand all of this economy crap... and if not, worry about it later. But then they want handouts. Yes, banks make their money on long term interest. But isn't something better than nothing at this time?

PS... after reading this one again and the comments, this should be featured. Just looking for the little red flag... ;o)

jeff belonger

Lenn - It is the same thing that is always wrong. They depend on the middle to support the upper and lower well the rubber band just got stretched beyond it's limit and has broken. What amazes me is that while these companies are being given huge amounts of money they still seem to be making their cuts by cutting JOBS! I know people who work for Citiand they seem to have some pretty expensive parties. Wonder how many would give up the parties for a job, bet almost all. Again there were no plans on how the bail monies were to be used and there still is not but if they keep giving the money without defining the use this situation will just continue and get worse. I understand this is a global crisis but if you are receivingmoney from this country to help your company then reduce your employment force in the other countries not the USA. By the way Lenn - great post maybe you should forward it to the President elect and his new financial team.

Kris. I'm against the American tax payer funding any type of parachute for any failing business. However, it would appear that $25-50 Billion to THE BIG 3 would serve the American tax payer better than giving $700,000,000,000 to banks that are not using the money to benifit any tax payers.

The difference, as it appear to me, is that money to the banks has no strings. We're taking an equity position with preferred stock. Giving the banks Billions of capital with NO STRINGS, has not worked. Paulson tried it when he handed out $250,000,000,000 thinking that the banks would modify mortgages. They didn't and he was caught red faced. The banks were using the money to buy each other. They were not, are not and have no intentions of, mortgage write-downs that would benefit home owners, ones in arrears or current. ALL MORTGAGES SHOULD BE WRITTEN DOWN TO MARKET VALUE.

This all goes back to the mortgage mess that we've read about for over a year, almost 2 years.

The investment bankers on Wall Street were the ones benifiting from the MBSs and now they are the ones benifiting from the mortgage meltdown. They designed the instruments and now they are getting covered for their losses as the home owners can't make the mortgages.

It's a mess.

Lenn, Just walk down the street in any town. I can't believe we have to bail out every bank on every block. Will we ever see the end of this? Oh wait, here come the car dealerships...

Ken. Nothing is too big to fail, except the American tax payer and they are failing in droves.

Missy. I read the "rquirements" for mortgage modifications of 11 mortgage companies Saturday and they have NO PROCESS for write-downs or modifications for home owners who are current. I believe HUD has some programs, but it's not for the 100 million or so home owners who are current. We, all of us, have lost tremendous value and refinancing is just simply not in the picture because the homes WILL NOT appraise. As more and more folks move for jobs, military, retire, have babies, etc. they are going to be stuck in a home that they cannot sell. It's going to get even uglier than it is now.

However, with a national write-down of mortgages, the American family would be able to save the investment bankers from themselves. This is one case where trickle down is NOT going to work.

hmmm... maybe it will all go to CEO compensation.

Kelly. Don't take responsibility for the mortgage mess. It was Greenspan that keep interest rates so low anyone could qualify. It was Wall Street that invented the MBSs. It was Franklin Raines that bought worthless loans for Fannie Mae. It was Congress and HUD that pressured mortgage companies to loan bad money.

Connie. I'm not sure who you believe will be put out of work with the failure of Citibank. The employees of City live in NY, make $250K a year, eat in NY restaurants at $50 price fix dinners. My sympathy is with the tax payer in Texas, Iowa, MD, CA and NE and across the country.

Christopher. The writing was on the wall when the banks got $350,000,000,000 with no strings attached and did not do what Paulson expected them to do, sell these mortgages to the government.

everard. Fine with me. I want us to drill too.

Jeff. I didn't get into the matter of indexes or margins because, while I understand them, it's a bit above my pay grade. Thanks. Great job.

Lisa. I doubt that anyone in government is going to listen to me. I don't make huge financial contributions to their relection committees.

Paul. What is so condfounding is that many banks didn't even want the money.

Shirley. Could be. When you make about $216,000,000 for the year, you can take a pay cut and still pay the gardner.

And in January, Pandit was given a sign-on grant of stock and performance-based options worth over $48 million, though the options currently no cash value. That brings the total to at least $216 million. More. . . . .

Lenn, I'm confused. Wasn't Citigroup in a battle with Wells Fargo over who was going to buy out Wachovia? What money were they planning to use if they need to be bailed out now? Is this new money going to go for the buyout of Wachovia? I really don't like what's happening these days.

Bob.

Citigroup reached an agreement early Monday morning to acquire the banking operations of the Wachovia Corporation after making a daring bid that pulled the deeply troubled company from the brink of collapse. More. . . .

All I can say is that it defies logic.

Just an aside to Paul's comment: ( Lenn, Just walk down the street in any town. I can't believe we have to bail out every bank on every block. Will we ever see the end of this? Oh wait, here come the car dealerships...)

I know that while many of these big banks are "in trouble" I would bet that the local banks in small towns are not in as much trouble, unless my area is totally unique.

One bank where I do my banking and have for 20+ years, does not have even one property in foreclosure. The other local bank has also put out info that they are not in financial trouble.

Of course it's a bit more difficult to get financing through these banks; not impossible at all but they are much more careful about how they loan out their money. I think it's rather interesting how the one bank (not sure about the other) has NO loan defaults or even close to being in default.

That said, I heard one of our car dealerships is going out of business (but that doesn't surprise me, they should have gone out of business a decade ago.)

Sorry if this is off topic but I guess I wanted to point out that not every bank is in trouble. ...and our local banks are run by local people and they do give back to the community in various ways...charity and stuff like that.

Those numbers are really interesting....while their mortgage payments went up after they moved in, these same folks also went out and got line of credit equity loans to furnish their new homes and buy new cars...so what makes it worse is their mortgage payment could be 51% but their total debt ration is much, much higher....Americans went crazy with spending as well...

Karen. Right you are. I believe that most of the "banks" in trouble have been investment banks. I should clarify that but then WaMu and Wachovia, etc. have gone under too. I have three banks, one local in Virgnia and one local in MD. They're not in trouble.

The other one is PNC that used $7.5Billion of tax money from the Treasury to buy National City.

I was so angry, I almost closed my business account there. Then I figured, what's the use? Who knows what will happen to any other bank. I want a MD/VA bank for my trust account.

Sonia. I'm not sure you read my hypothetical right. Or, perhaps I wrote it wrong.

My buyers herein were debt free when they purchased their home, which is how they qualified for the high LTV mortgage loan.

I modeled this buyer after a real family to whom I sold a home in 2005.

300-600 barely covered our gasoline bill those months when it was going through the ROOF. That's pretty much where the "stimulus money" went.

At any rate, it's hard to tell where we are going. I just hope my MIL who is retired from Citi doesn't move back in ;-P (just kidding if she finds this somehow!)

Renee. I thought about that. Gas was sky high when that money went out. I didn't get any. They don't like me.

What's an MIL?

mother-in-law

Lenn,

Trickle down economics only works when the head waters are flowing naturally...there are too many dams trying to divert a little leak too long a way!!! Thanks, Fran

Renee. That's funny. My MIL is long gone to her reward. However, when ever Nancy Pelosi opens her mount, I'm reminded.

Fran. Right you are.

Citi was one of the first to struggle mightily in this market. Wasn't too long ago that they received a tidy investment sum from outside the US to help them with their problems. Meanwhile, they continued to operate on the status quo until just recently. Now we're 'giving them more??? My kids don't take advantage of me like that! On the government level, some one needs to shake their heads real hard because I think their eye balls maybe loose! The AMERICAN people are where the bail out effort should focus (not with a 300-600 check either!). Not these large companies who have proved repeatedly over the last many months that they have created a problem they do not know how to fix.

Lets see - 326 billion + 750 ish billion....1.076 trillion divided by 120 million = LOTS OF CASH!!!!! Where's my check? I'll put it back into the economy, I promise (fingers cross behind the back...)

It's nice to know that as a taxpayer I'm not too big to fail. Apparently, I'm just the right size. After all, why should the consumer/taxpayer get any real relief....our spending only accounts for 2/3 of the economy.

I'm with Missy, I don't get it, I just don't get it.

Matt. There isn't any "getting it" unless you're a jaded old cynic like Lenn. BTW, I'm sure that part of the $320,000,000,000 to City for guarantees was to cover the foreign investors. That's been a pattern all along.

Scott. Funny thing. The investment banks are NOT putting the money back into the economy. They're bailing out their investors.

Lenn - I quit drinking years ago, but reading this post makes me want a good, strong drink about now! I read Julie's comment about her mortage with Citi...she's done the same thing as I have. Some risky loans huh??

Renee's funny...and, your mother-in-law was like Pelosi? Now, that's pretty scary! LOL

Lenn, I wonder how much it would cost to write down all mortgages to market value? And it would have to be all whether they are delinquemn or not or it wouldn't work. Let's say a max of 95% of true value. Any idea?

Lenn - I disagree with bailing out the lenders. I disagree with bailing out any industry. I disagree with changing the terms of contracts, including mortgages. Why should the government reward those who made bad decisions?

This is the frozen, winter waterfall version of trickle-down. The only thing that has trickled down for me this year is my income (actually that collapsed) and the value of my homes. I'm gonna party like it's 1999 (in which year I actually earned nearly double what I earned in 2008!)

Since when do the big players on Wall Street deserve an American Taxpayer guarantee? If relief is not given to the hard working middle class we will collapse and return to a two class society. This isn't brain surgery but the folks in Washington don't want to listen as they are too busy bailing out their cronies that got them elected.

Lenn - This was an amazingly awesome post and it should have been a feature. Thanks for summing it up in a nutshell - this is the typical American family indeed. Not a pretty picture! To read this as you point out the reality is exhausting enough - but, living it is so much worse. We are living a in a sleep deprived, depressed society right now. If people aren't working longer and harder, they're up all night wondering how they're going to pay their bills.

Lenn - How much more bailing out can the government keep doing? Every industry is starting to get in line now with their hands out. The TARP money was given out to the financial institutions who were in such DIRE STRAITS over a month ago and I'm still waiting to see it start to trickle down to the families and homeowners who need it most. All they've seem to have done with it is put it in their greedy coffers.

You really put this in human perspective. We can try to explain this to clients, but you have succintly put it into perspective that nearly everyone can understand. That said, it is still outrageous. And, I, too, have a Citi mortgage. Unbelieveable. But, they were one of the last standing that hold an inordinate amount of mortgage-backed securities which everyone thought to be safe until those Wall Street geniuses came up with the derivatives that they nor anyone else understood. And there is goes poof! Like Jack and the magic beans. Great post!

NOV

2008

Sabinske. GREAT COMMENT. You got the message I was trying to get across. There is no effort on the part of the Treasury to even consider the long term harm these investment bankers caused to the average American family.

Donna. Right you are. They government is even paying them interest payments on the money they handed out that is still in their coffers. I don't believe that they plan to do much with the money except to pay dividends, executives and bonuses and ecquisitions. They may devode a SMALL percentage to "bad asset reduction".

Carol. Indeed. I have absolutely ZERO sympathy for the executives on Wall Street. Their invention of the securitized mortgage products is partly what caused this mess. Now they get Billions to keep themselves afloat while millions of American families are going under to be financially ruined for a decade.

Cemeron. Cronyism is the only word to describe the events of TARP and TARP II.

Ken.

Welcome to the club of survivors. I'm going to publish a "Perscription for Success for 2009".

Sharon. I'm fine with not bailing out anyone. Have been since the beginning of the mortgage mess.

THAT SAID. If the government is going to use the American taxpayer money to bail out anyone, it should NOT be the industry that facilitated the mess. We don't subsidize corporate failure in this country.

I actually consider the American home owners victims in this mess. To understand what was happening in the real estate boom requires a modicum of knowledge. I give the consumer no credit for such knowledge. However, the financial folks on Wall Street clearly understood the risks of the sucuritization of the MBSs. The American public did not.

Bryant. I've thought about that many times. I believe that I've seen somewhere that about 25% of all real estate in the US is mortgage free. We don't have to insure write-downs on all homes loans, only the ones that DEFAULT.

See" http://activerain.com/blogsview/806915/BROKER-BRYANT-YOU-ASKED-HOW-MUCH-IT-WOULD-COST-FOR-A-MASSIVE-MORTGAGE-WRITE-DOWN-LENN-IS-RAMBLING-AGAIN

Linda. Julie is like so many home owners who make payments on time or ahead of time. The media would have us believe that it is the American home owner that is the cause of this mess.

Lenn while it's true that these bailouts on the surface don't help the average Joe what would happen if a company like Citigroup went down the tubes? I think a company this large that has it's hand in almost every financial vehicle including insurance would cause a catastrophic disturbance if it went under.

Lenn - I am pretty sure that they will not lower the rate on any of my cards, or anyone else's for that matter.

Bill. Why? The world didn't fall apart when Fannie and Freddie went into receivershop.

Citi is a public company. The shareholders would be wiped out. The bond holders would get a share of the residual. The mortgage holders would continue to make payments and city would simply be liquidated over time. Or, reorganized over time.

I spend some years as a bankrutpcy trustee. These things can happen very smoothly.

There is no company that is too large to fail. And no home owner too small to benifit from a viable housing market.

Mike. My Chase card went up in interest last month and I have never been late with a payment and pay the balance every single month.

Go figure.

NOV

2008

Lenn,

I just read in the NY Post, two Republican City Council members are encouraging Citigroup's leaders to rename the new Mets stadium Citi/Taxpayer Field. Citigroup is supposed to pay $400 million over the next two decades to name the stadium Citi Field.

I agree, let them go bankrupt they are not very good at any of their businesses any way. IMO the reason they are not good at any of their businesses is because they have become way too BIG! Big is not always better. They have plenty of assets they can sell to raise money. They should divest.

Mitchell. I agree completely. If Citi can't make it as they are, they should be in chapter 11, reorganized, broken up and the divisions either sold off or liquidated. Shareholders took a gamble when they purchased the stock and they should gain or lose as the business goes.

The BOD and Executives should be replaced and perhaps, go to jail if it can be shown that they claimed that the company was viable when it was on the way to bankruptcy.

What ever happened to Sarbanes Oxley???

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