Citibank Fail

There are a lot of news items about Citibank today, but this one caught my eye. Citibank is saying that it’s balance sheet is so weak that it cannot afford to pay the interest payments on the loan.

Citibank received $45 Billion dollars in funding from the US Government. This is in addition to the money taken from Abu Dhabi{EE380D20-B249-4399-A1BE-52061D9B273F} and equity investments from Prince Al Waleed.

Republicans have repeatedly argued against “Nationalization” of banks. The fact is that our government now owns a substantial stake in Citibank. Citibank is on the brink of insolvency. At this point, there will either be a run on Citibank with catastrophic consequences or the government will have to take the bank into receivership and reorganize it.

The only difference between Citibank and the other insolvent banks seized by the FDIC every week is size. Postponing a reorganization of Citigroup only benefits the current shareholders and politicians who are willing to risk disaster for their principles.

As Krugman argues, nationalization is as American as Apple Pie. I agree with Krugman and think that Citibank should be taken in and out of receivership/reorganization as soon as possible.