For the first time, just last night, we actually chatted about the safety of Citi’s (C) retail banking operations, in light of the failures of WaMu, Wachovia and several others. The conclusion: There’s really nothing to worry about, and if Citi were to fail, we’d have much bigger concerns than the FDIC bureacracy while we wait to get our insured deposits back.
But what’s crazy is that the conversation is actually happening now. And we see Felix Salmon is talking about it as well:
But this is important: don’t panic. Citi really is too big to fail, and its depositors are safe. Sprizouse is wrong when he says this:
The FDIC cannot protect all of CitiBank’s depositors if the massive behemoth of bank goes under.
In fact, the FDIC can easily protect all of Citi’s insured depositors. According to the FDIC, the combined total domestic deposits of Citigroup’s insured subsidiaries was $266 billion as of June 30. Of that $219 billion was in the largest subsidiary, Citibank NA, and of that, just 40.58% was actually insured — or about $89 billion.
Now that number will have gone up when the FDIC raised its insurance limit to $250,000 from $100,000, but even now I doubt that the total amount of money the FDIC is insuring at Citibank is much more than $100 billion. A lot of money? Yes. But not a huge amount by TARP standards, and easily within the abilities of the US government to cover.
It’s not surprising that this chatter would start yesterday. Think about it. Investors decided en masse that it was time to buy, and they bought everything, across the board, all except Citi. Then Pandit & Co. hastily buy 1.2 million shares and then they tell the Journal that they may loff 60,000 people. It’s freak out time over there. What we can’t figure out is why Paulsen isn’t on the phone, telling Pandit to sell everything in site, including the chairs and spare computers. Then again, he’s got a lot of fires to put out.
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