We Built This City On CDOs
Doh! The song says to build the city on rock and roll – not CDOs!
Imagine: a simple little screw up like that in your business plan and BOOM: $18 billion in writedowns.
On top of that, the consumer lending business is now struggling resulting in a $4 billion increase in charge offs and loan loss reserves. That caused a 71% decrease in net income in Citi’s core Global Consumer segment – on top of the massive mortgage backed securities writedown (C 4Q Earnings Release).
Fortunately, Singapore, Kuwait and Saudi Prince Alwaleed have agreed to invest more in Citigroup as part of a $12.5 billion capital infusion. Citi will also issue some preferred securities and cut its quarterly dividend from 54 cents to 32 cents (C Press Release).
But hey: what a great song!
Disclosure: Top Gun has no position in Citigroup (C) shares.