Citigroup's (C - commentary - Cramer's Take) to blame for so much that is wrong right now that it seems imperative that someone step in and renounce most of the actions that Chuck Prince put into place and bail out the other parts swiftly to become a plain old bank (POB?) as soon as possible.
We are quick -- depending upon political orientation or sensibilities -- to blame either the aggressive lenders or the irresponsible borrowers. I don't even care any more. What matters is capital, raising capital fast and Citigroup must quickly dismantle the acquisitions Prince made, including the disastrous Japan incursion, and then start selling off businesses and get the government to help bail it out by injecting itself into the structured investment vehicle process. The time has long since passed to worry about moral hazard. The action in Citigroup is critical right now because of a series of horrible decisions made by Prince to get much bigger in mortgages right at the end of the boom.
It must sell its mortgage servicing portfolio, too, agreeing to give some guarantees for some amount of money owed to the buyer as servicing rights can be a lucrative business. The fact that Treasury seems "somewhat" engaged (my quotes) is not enough. The problem at this bank is too big to be ignored by the U.S. government. Put simply, if Citigroup goes, we all go.
Now, while I may not care about the moral hazard, a word should be said about Prince. I had been calling for this man's head for a year now because it was obvious to pretty much everyone I talked to in the business that Citigroup was taking on more and more risk as Prince tried to cover up the terrible day-to-day management that had led to restructuring after restructuring. He had zero leadership skills and divisions ran amok. I want to distinguish this situation from Countrywide (CFC - commentary - Cramer's Take) and Washington Mutual (WM - commentary - Cramer's Take), both of which were simply trying to take market share in what turned out to be a stupid and reckless way. Both Angelo Mozillo and Kerry Killinger are to blame there, but I don't think either can bring down the system like a failed Citigroup can.
Jim Cramer Blog What We Need to Get to a Turning Point 11/25/2007 8:59 PM EST Our problem is housing, and a bank must cut off credit to a homebuilder before we can move on.
Jim Cramer Blog Cramer Returns Nov. 26 11/23/2007 9:57 AM EST After a break, he'll resume his regular blogging.
Jim Cramer Blog Why a Bottom Will Be Hard to Find 11/21/2007 4:26 PM EST Stocks like AIG show why it'll elude us even with both hands.
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