The material on this site is for financial institutions, professional investors and their professional advisers. It is for information only. Please read our Terms & Conditions, Privacy Policy and Cookies before using this site.

All material subject to strictly enforced copyright laws. © 2020 Euromoney, a part of the Euromoney Institutional Investor PLC.
Banking

Do nothing.

It's not too late to enact a better plan than the one the Treasury has put on the table. Peter Lee looks at alternative strategies that might prove sharper than Paulson's bailout plan.

Muddle through


There is a final choice: carry on muddling through on a case-by-case basis from one institutional failure to the next and hope that the public and private sector can each find a way to play a positive role.


Didn’t this just happen with Citigroup and Wachovia?


There are four interesting aspects to this deal. First, Citigroup appears to have recast itself as a winner in the crisis, one of the strong, having absorbed $55 billion in write-downs and losses, and raised $50 billion in tier 1 equity.


Second, the deal marks the folding of the last of the US’s big thrifts into the arms of one of the country’s strongest and largest banks. Following JPMorgan’s takeover of Washington Mutual’s banking operations and Bank of America’s acquisition of Countrywide, the corpse of Golden West, which brought down Wachovia, now sleeps inside Citi.


At the same time, Bradford & Bingley, the last of the large UK building societies – on which the early US thrift savings associations were modelled – to have floundered following demutualization and reinvention as a bank, has been nationalized. Could this be a natural break in the fire?


Third, at a time when fear is widespread that the full extent of many banks’ bad loan problems has yet to be revealed, Citi seems to be confident of its own capacity to identify and value the problem positions inside Wachovia’s banking subsidiaries’ $700 billion of banking assets.







You have reached premium content. Please log in to continue reading.

Read beyond the headlines with Euromoney

For over 50 years, our readers have looked to Euromoney to stay informed about the issues that matter in the international banking and financial markets. Find out more about our different levels of access below.

SUBSCRIBE ONLINE TODAY

Unlimited access to Euromoney.com and Asiamoney.com

Expert comment, long reads and in-depth analysis interviews with senior finance professionals

Access the results of our market-leading annual surveys across core financial services

Access the results of our annual awards, including the world-renowned Awards for Excellence

Your print copy of Euromoney magazine delivered monthly

£73.75 per month

Billed Annually

FREE 7 DAY TRIAL

Unlimited access to Euromoney.com and Asiamoney.com, including our top stories, long reads, expert analysis, and the results of our annual surveys and awards

Sign up to any of our newsletters, curated by our editors

LOGIN NOW

Already a user?

We use cookies to provide a personalized site experience.
By continuing to use & browse the site you agree to our Privacy Policy.
I agree