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Citigroup Earns $2.2 Billion In Quarter

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Two years after Citigroup became the poster child for all that went wrong in the financial system, the banking giant announced Monday that it had pumped out a profit for the third consecutive quarter. At a time when the home foreclosure practices are under acute scrutiny, Citigroup said that losses across its consumer lending businesses were starting to ease.

Citigroup, which is trying to extricate itself from partial government ownership, reported a net profit of $2.2 billion in the third quarter — a figure that topped most analysts’ expectations. The gains partly reflected the fact that Citigroup released $2 billion that had been set aside to cover loan losses.

The results followed a big gain in quarterly profit at JPMorgan Chase and suggest that banking businesses linked to American consumers are finally starting to stabilize. Other big banks are expected to report similarly strong results in coming days, despite a weakening in traditional Wall Street businesses.

Whether the improvement is sustainable remains an open question, given the fragile economy. But Vikram S. Pandit, Citigroup’s chief executive, said that he was pleased with the bank’s progress on his plan to turnaround the troubled company.

“Achieving our third straight quarter of positive operating earnings is continued evidence that we are successfully executing our strategy,” he said in a statement. “We believe we have put in place all the elements for continued profitability.”

Citigroup’s profit of $2.2 billion profit, or 7 cents a share, compared with a loss of $3.2 billion or 27 cents a share, a year ago. The results reflected a $800 million pre-tax loss tied to the sale of its student loan business to Discover Financial and Sallie Mae.

Revenue fell 10 percent, to $20.7 billion from $23.1 billion a year earlier, reflecting a decline in trading.

Revenues falling but profits up, all win win for the banks and 0% interest rates from the friendly Fed.

Meanwhile back in the real world the people are still struggling.

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The Fed's Bernanke, along with others, have claimed that "QE2" and monetary policy are "necessary" due to high unemployment.

But let's remember, we had the same basic problem after 2000. The employment rate came down. The Fed cut rates to 1% under Alan Greedscam and on top of it, intentionally looked the other way at all the fraudulent lending that was going on in an attempt to fix the economy.

How did it work?

This ought to sober people up considerably.

Note that the employment rate (that is, the percentage of people employed in the general population) dropped during the 2000 recession and never recovered materially, even though The Fed held their low rates all the way into 2005.

Indeed, it was only when rates started to tick up in late 2004 that the employment rate began to rise once again, and then only modestly.


Because capital formation is required for new businesses to form on a sustainable basis.

Capital formation requires borrowing to be expensive when it is undertaken for consumption or speculation. If it is not, then borrowing goes into those vehicles instead of building businesses, because it is easier and cheaper to speculate or consume than to build something.

So long as this is not the case there is no growth in the employment rate, and due to the "easy credit" policies of Greedscam and Bernanke during the 2006s we never regained the former labor participation rate we had before the 2000 recession.

Now we've tripled the losses from the 2000 recession, and there is no evidence that it's turning around - at all. Nor will it, until capital formation is once again possible.

And that, my friends, is impossible so long as The Fed Funds Target remains at "exceptionally low", extended period or not.

All that happens when you do this is that capital is not lent for productive purpose, it is lent to speculation, consumption and scams. We got lots of all three during the 2000 decade and we've learned exactly nothing from the experience, as Bernanke now proposes to do even more of it.

Don't expect him to address this issue - he won't. Nor will government. We will instead face this when we run into a fiscal or currency crisis, at which point we'll be forced to withdraw the accommodation or have our government collapse, because nobody will admit to the fact that this scam is just another in a long line of scams and it is intended to screw blind every saver who would otherwise form that capital necessary for businesses to be born and grow.

Until you remove Bernanke and those who enable him nothing will change, and when the markets realize this the "correction" will come in a most-unpleasant fashion.

Charts at the link.

Still I'm sure it's contained....

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  • 417 Brexit, House prices and Summer 2020

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