Friday, February 27, 2009

Equity Futures Off on Lousy GDP, Fannie, Citi News

The US economy shrank 6.2% in the fourth quarter, confirming that we are indeed in a deep pickle.  The number was revised down a whopping 2.4% from initial estimates, nearly five times as large as the average revision.  Consumer spending dropped at a 4.3% annual rate last quarter as many lost their jobs and their lunch when looking at their 401K returns.

Citigroup finally came to an agreement with the government on the third and hopefully (but not likely) final version of its bailout package.  The Treasury Department agreed to convert as much as $25 billion of preferred shares into common stock giving the government a 36% stake, as long as private holders agree to the same terms.  The swap has been anticipated for nearly a week, so this isn't necessarily shocking news.  I suppose what has investors whacking the stock down nearly 50% before the open is that Citi boosted its loss for 2008 by 48% to $27.7 billion.  From the taxpayers perspective, the swap, is obviously a much worse deal, but at this point, we're already in bed with Vikram so, we might as well close our eyes and pretend its Brad Pitt (or Angelina, whichever you prefer).

Fannie reported a $25.2 billion loss for the fourth-quarter, and politely put in its request for $15.2 billion from the Treasury.  The benefits of conservatorship, I suppose, is that you don't have to go with your tail between your legs to Congress to plead for the money like the car company CEOs.  The most troubling portion of Fannie's announcement was the part about total delinquent loans nearly doubling last quarter to $119.2 billion from $63.6 billion in the third quarter.  Or maybe it was the statement from the company that said "We expect market conditions that contributed to our net loss for each quarter of 2008 to continue and possibly worsen in 2009."  Less than reassuring, and also an indication that Fannie will most certainly be back for more government injections to support its declining net worth.  I must have already exhausted all of the Fannie spanking pun possibilities out there.  If anyone has any new ones for me, please feel from to comment.


Anonymous said...

Angie please....

Anonymous said...

TARP Song (which is making fun of the whole bailout by the federal government -