-Tim

I hear what you’re saying about Citi and BofA — leaving the nest before you can fly sort of thing. Again, I hear you — what happens if they run into serious financial trouble before lawmakers craft new rules in how they deal with these “too big to fails”?

I’ll be sure to check in tomorrow and ruin your post for the next day, haha.

-Tim

And I knew they were irritated with the government on their backs, but neither Citi nor BofA are in great shape, even with this new tax break. They may show a profit either this quarter or the next based on this, but what happens after that? If it’s me, I keep at least a cushion for the second year. I know Citi had to worry because they couldn’t get the CEO they wanted, but still…

Thanks for covering this, I haven’t been able to write about it recently, but I’ve been doing a lot of thinking.

You wrote: “I did have a question answered for me when it was announced that the worth of Citigroup’s shares will drop drastically, and their stock price took a 6% hit off the announcement.” I’m not sure if this is the case anymore. According to the Washington Post, the govt did some finagling with long-stand tax laws to prevent that from happening.

From the WaPo:

“The Internal Revenue Service on Friday issued an exception to long-standing tax rules for the benefit of Citigroup and a few other companies partially owned by the government. As a result, Citigroup will be allowed to retain billions of dollars worth of tax breaks that otherwise would decline in value when the government sells its stake to private investors.”
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For the me, my resounding answer when you asked “Why now?” is to get the govt off their back! TARP banks had to participate in Making Home Affordable, they went to the White House on Monday and were not pressured, but asked by the president to increase consumer lending…not to mention all the controversy surrounding executive pay. Whether the American citizens feel it’s time or not, these big banks have been dying to get back to business as usual w/out the govt looking over their shoulder.
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It may seem like there’s no more govt protection coming, but this latest move by the IRS to protect Citi is just that — one tax expert called it merely “another form of assistance.”

Great post, thanks for getting me thinking! If you’re interested, that WAPO link is: http://www.washingtonpost.com/wp-dyn/content/article/2009/12/15/AR2009121504534.html?hpid=topnews

-Tim