What a deal

Now, let me see if I understand this:

The "insurance" Mr. Pandit refers to are CDS.

The banks have vociferously argued with the regulators that CDS are not "insurance", so that the CDS can qualify as AAA rated assets, thus allowing the assets they are hedged against from being downgraded. Those assets might otherwise go from AAA to BBB, or lower, in a heartbeat, and be worth far, far less AND require much higher reserve requirements.

That is why, in the official deal between Citi and the US Treasury, the word "insurance" never appears.

But in front of Congress, the banks argue that the CDS are "insurance" so they can mollify lawmakers for 90% guarantees from the government on these assets that so desperately need this "insurance."

The US Treasury is guaranteeing $250 Billion of these toxic assets from just Citi in this deal alone, which does not reflect, nor include, monies already given them.

The laughable/tragic thing about this is: If these assets gain in value, Citi gets 100% of the profit, the US Treasury 0%. If these assets lose value, the government will pay out 90% of the losses.

These assets will probably lose all of their value.

CitiGroup alone, over the last six months, has received government guarantees for toxic assets of over $300 Billion, yet the entire market cap of Citi is less than $20 Billion.

That translates into this - If the $300 Billion in Toxic assets are really worth $0 (there are no bidders for what they hold), then CitiGroup is bankrupt by 14 times.

300 divided by 20 = 15 - 1 ($20 Billion market cap) = 14

Best case scenario might get bids of 30 cents on the dollar for these toxic assets. That leaves $210 Billion in losses, and Citigroup is still bankrupt 9.5 times over.

210 divided by 20 = 10.5 - 1 ($20 Billion market cap) = 9.5

Citi cannot and will not survive this. Every dime extended them will be a 100% loss.

Guess what - We haven't even touched on all the other corporations with significant toxic holdings who are working their own separate deals with Treasury. This type of guarantee deal is just getting started. Multiply Citi's deal by 10, 20, 30 times or more?

Oh, and the Federal Reserve has already worked guarantee deals with the Koreans, the Chinese, the Japanese and a few others. Yes, our US Treasury is guaranteeing the toxic holdings (sold by our guys on Wall Street) in foreign central banks. Those numbers make Citi's deal look downright small.

C'mon. What are these clowns in Washington doing?

At least one, Alan Grayson D-FL, is asking some good questions.

He needs the other 534 clowns to make it mean anything.