What is this blasphemy you say? One of our main tenets is to observe what people DO with their money, and not what they preach. The public clearly loves Bank of America and Wall Street again because how else would Bank of America be able to raise $19 billion from us, to pay us back?
In an “Open Letter To Vikram Pandit, CEO of Citigroup” we urged Vik to sell the 34% government stake back to the very public that bailed Citigroup out before year-end. Why? So Citigroup can pay their employees big bonuses in 2009 by saying they are no longer under the government's stewardship. Sure, paying back $45 billion in TARP sounds like a lot, but Bank of America just did it!
In fact, joining Bank of America are Bank of NY Mellon Group, Goldman Sachs, JP Morgan, Morgan Stanley, and State Street who've all been able to pay back their TARP loans and pay their people handsomely this year. This begs the question, what's wrong with Citigroup, one of my main “go broke banks” used to optimize my finances.
SORRY, I DONNO
Unfortunately, I'm not a banks analyst, nor do I care to comb through Citigroup's financials to figure out whether they have the means to pay back their TARP loan. Maybe they are really suffering, that's why their share price is stuck around $4. Or, maybe their share price is stuck around $4, because management hasn't made any noise about freeing themselves from government control! It makes you think whether being under government control is good for capitalism doesn't it?
The main irony of Bank of America's recent $19 billion capital raising, is that the money comes from the very public who bailed them out in the first place. Money just goes from your left pocket, back into your right pocket. Some call this “robbing from Paul to pay Peter.” Bank of America calls this, “Thank you citizens of America for hooking us up again!” A friend of mine from BOA ML was wondering this weekend who this year's Ken Lewis (aka Great Savior) would be. Little did he know it would be all of you.
We're very pleased by Bank of America's ability to raise $19 billion so quickly because of three reasons: 1) It shows there is tremendous amount of liquidity in the system, 2) Risk appetite is back even for banks who have rallied 100% from their lows this year already and 3) The public no longer has their silver-tipped pitchforks out to spear an innovative industry responsible for employing hundreds of thousands of innocent people.
Citigroup, you still have about 10 working days left to raise money from the public to pay back, the public. Kuwait's sovereign wealth fund just offloaded $4.1 billion worth of Citigroup shares, whatcha waiting for?
Readers, why do you think the public has been so quick to forgive Bank of America and the other TARP money institutions? Or, do you think we have an error of correlation here, and those investing another $19 billion in BOA are not the same people who are still against TARP institutions? If this is the case, was it really our money who bailed out these banks in the first place?
We're hosting another book giveaway this week, and every week for the next four weeks so stay tuned!
Related: Is It Worth Working On Wall Street
Financial Samurai – “Slicing Through Money's Mysteries”
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