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But Can Merkel Win a Football Championship? We Didn't Think So.

Jun 11, 2012
Cheeky Irish sports fans tweak the bailouts.

Citigroup's Love Letter to Shareholders

All Citigroup ever wanted was to give its shareholders a bigger dividend.&nsbp;

Back in March, the Federal Reserve conducted a new round of "stress tests" for American banks to see if they could survive another financial crisis.&nsbp;

Citigroup....didn't fail the stress tests exactly - as it snippily announced in a pointed blog post -  but it also didn't get everything it wanted.&nsbp;

It's like this: ever since 2007, when CEO Chuck Prince said the bank would keep dancing as long as the music played, Citigroup has borne the shame of losing its dividend. Back then, when analyst Meredith Whitney suggested the bank might cut its dividend, Citigroup executives turned on her and snarled.

Whitney, of course, was right. Citigroup had to eliminate its dividend, suffer the indignities of enormous bailouts and executive changes, and throughout five hard years of being Too Big to Fail,the bank has yearned for nothing more than to recapture its former grace with shareholders. Citigroup has a dividend in place right now, but the bank does not think it's enough.

In a press release late Friday, Citigroup wanted to remind shareholders that it has not forgotten them. The bank insisted it would re-submit its financial results to the Federal Reserve on Monday. And while Citigroup is going to let the dividend issue slide for now - known here as "returning capital to shareholders" - next year, Citigroup seems to indicate, it expects a better answer. Because it's worth it. Below is Citigroup's announcement, with a handy translation.

In March, the Federal Reserve released the results of its hypothetical severe stress test scenario as part of the 2012 CCAR. The results showed that Citi comfortably exceeded the stress test requirements without Citi’s proposed capital actions.

Translation: "We passed the stress test if you don't count our dividend plan. Just saying."

However, while the Federal Reserve did not object to Citi conducting certain capital actions...and to continue its current dividend, it did not approve Citi’s request to return additional capital to its shareholders.

Translation: The Fed didn't let us increase our dividend, although it let JP Morgan hike its dividend by 20 percen ...

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Jun 8, 2012

Hey Brother, Can You Spare $500 Billion for America's Banks?

Jun 6, 2012
As the concept of systemic risk becomes an issue again, one Nobel Prize-winning economist has put a dollar value on just how much it would take to make America's top banks well-capitalized in the event of another crisis.

GM's Bold Pension Fix: Not Good Enough?

Can the automakers ever get their pension problems right?

Ford has already worked to end its pension plan - the company owes $74 billion on pensions and only has a market value of $40 billion. Last week General Motors joined the fray and announced the most drastic planned fix: the company would end its $26 billion pension plan for any salaried employees.

But a Moody's analyst says General Motors' pension fix may not even have made a dent in its financial picture.

Per the Philly Inquirer,

GM said Friday that it will offer 42,000 retirees a lump-sum of cash if they agree to stop taking monthly benefits. For the rest of the 118,000 U.S. salaried retirees and spouses, GM will buy a group annuity that will make monthly payments starting in 2013.

GM's goal was to get that $26 billion of pensions off GM's books - where they made the company's balance sheet and earnings look weaker because pension costs rise and drop often and are hard to account for. The pensions are now the responsibility of Prudential Insurance Company of America, which will manage them. GM will pay Pru $3.5 billion to $4.5 billion in cash to take over the pensions.

There's only one problem: this plan doesn't help GM very much.

Moody's analyst Bruce Clark wrote today that the billions GM is paying to Pru essentially wipe out any money-saving benefits of the plan.

More importantly, he points out that the main issue with GM's pension plans is that GM's $26 billion pension plan for salaried workers is just a fraction of its overall pension problem. GM has, as the WSJ noted, "$71 billion in obligations to union-represented factory workers." GM is $10 billion short on its pension plan for those hourly workers, and $25 billion short on its pensions overall.

If GM offloads those hourly pensions to Prudential as the company did for salaried employees,  it would affect GM's available cash significantly.

And how much does the whole elaborate Pru plan help GM cut from its pension obligations?

A total of $1 billion.

That leaves $24 billion the company still has to find somewhere.

 

 


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Jun 4, 2012

The scratching, burning, socially embarrassing financial crisis

May 31, 2012
A satirical video from political cartoonist Mark Fiore brought down the house at a conference on the risks of debt to the global financial system.
Posted In: risk, too big to fail, debt

What happens if Greece defaults? A flow chart

May 24, 2012
If Greece ditches its austerity plan and defaults on its loans, how might that play out in the global economy? Follow our flow chart to find out.
Posted In: Greece, default, Eurozone

One of These Things Is Not Like the Others: Facebook Edition

Facebook, on the day of its somewhat rocky Internet debut at $38, traded in the range of $40 a share. This gave the company a market valuation of $112 billion. Few newborns emerge that size - and even fewer mature companies get there. Facebook is playing in the big leagues. Here's a list of the market values of some Very Important Companies that have been in business for decades. See how they compare to Facebook.

  • Google: Market value $200 billion; 2011 revenue $37.9 billion
  • JP Morgan Chase: Market value $127 billion; 2011 revenue $99.8 billion
  • Verizon: Market value $117 billion; 2011 revenue $110.9 billion 
  • Merck: Market value $115 billion; 2011 sales $48 billion
  • GlaxoSmithKline: $112 billion; 2011 sales $44 billion
  • Facebook: Market value $112 billion; 2011 revenue $3.7 billion
  • Anheuser-Busch: Market value $111 billion; 2011 revenue $39 billion
  • PepsiCo: Market value $109 billion; 2011 revenue $66.5 billion 
  • McDonald's: Market value $91 billion; 2011 revenue $27 billion
  • Cisco Systems: Market value $89 billion; 2011 sales $10.4 billion

Now, isn't that interesting?


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May 18, 2012

One of These Things Is Not Like the Others: Facebook Edition

Facebook, on the day of its somewhat rocky Internet debut at $38, traded in the range of $40 a share. This gave the company a market valuation of $112 billion. Few newborns emerge that size - and even fewer mature companies get there. Facebook is playing in the big leagues. Here's a list of the market values of some Very Important Companies that have been in business for decades. See how they compare to Facebook.

  • Google: Market value $200 billion; 2011 revenue $37.9 billion
  • JP Morgan Chase: Market value $127 billion; 2011 revenue $99.8 billion
  • Verizon: Market value $117 billion; 2011 revenue $110.9 billion 
  • Merck: Market value $115 billion; 2011 sales $48 billion
  • GlaxoSmithKline: $112 billion; 2011 sales $44 billion
  • Facebook: Market value $112 billion; 2011 revenue $3.7 billion
  • Anheuser-Busch: Market value $111 billion; 2011 revenue $39 billion
  • PepsiCo: Market value $109 billion; 2011 revenue $66.5 billion 
  • McDonald's: Market value $91 billion; 2011 revenue $27 billion
  • Cisco Systems: Market value $89 billion; 2011 sales $10.4 billion

Now, isn't that interesting?


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May 18, 2012

What Did JP Morgan Get Itself Into?

May 17, 2012
As more details emerge about JP Morgan's money-losing "London Whale" trade, the goalposts are moving fast and it's harder than ever to explain what's going on.
Posted In: London Whale, JP Morgan, Jamie Dimon, losses

What to expect from JPMorgan's shareholder meeting tomorrow

May 14, 2012
JPMorgan Chase CEO Jamie Dimon faces shareholders tomorrow after the announcement of a $2 billion loss. He'll most likely get to keep his 2011 pay package, but expect changes in leadership elsewhere in the company.
Posted In: JPMorgan, Jamie Dimon

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About this collection

Former Marketplace reporter Lisa Napoli explores the far corners of Bhutan.