Since I’ve been writing about preferred and common stock so much this week, I thought I would just try to explain the arithmetic of the Citigroup deal announced today. (By the way, it isn’t a done deal: all it says is that Citi is offering a preferred-for-common conversion to its outside investors, and the government will match them dollar-for-dollar, although the WSJ says that several investors have agreed to participate.)
Day: February 27, 2009
The Smell Of Coffee
The late Rudi Dornbsuch of MIT had a way of cutting to the chase, preferably in public and with a minister of finance present. He knew a huge amount about financial crisis, and could distill a lifetime of study and involvement in collapses succinctly: “it always takes longer than you think; but when it happens, it always happens faster than you can imagine.”
The latest credit default swap data for European banks bring Rudi’s perspective to mind – for the United States. We’ve debated this week what to do about U.S. banks, arguing about which unappealing options are less bad. In my view, the choice is not “nationalize vs. don’t nationalize,” but rather “keep our current partial nationalization/bottomless pit subsidy system vs. start down the road to reprivatization.”
But, honestly, this entire debate may be overtaken by events. Continue reading “The Smell Of Coffee”
The Baseline Scenario 