October 2, 2007 (LPAC)--The big commercial and investment banks are reporting their third-quarter results this week, but the billions of losses they are admitting to, are only a fraction of their actual losses. The reality is that they are all bankrupt!
One proof of the magnitude of the coverup, is that Citigroup's investment bank division has just joined up with buyout bandits KKR (Kohlberg, Kravis Roberts), to create an off-balance sheet vehicle to buy up "impaired loans," including those of Citigroup. As the Financial Crimes reports this morning, "the vehicle would allow Citigroup to sell some leveraged buy-out debt, which it has underwritten but is struggling to syndicate, as well as other troubled loans." Like the shell companies set up by Enron, the new vehicle will allow Citigroup to take its nonperforming loans, and thus its losses, off its balance sheets. How much in losses? The vehicle was created with $5 billion in stock and $10 billion in loans from the parents. If it were to leverage this startup fund tenfold, not an unusual figure, it could take $150 billion in worthless paper off Citigroup's balance-sheets.
The Citigroup-KKR vehicle announcement, makes it clear that third quarter earnings recently released by Citigroup, and by the Swiss banking giant UBS (Union Bank of Switzerland),-- even though they show billions of dollars in write-downs and losses,-- are only the shadow of the real losses that are rocking these banks.
Citigroup announced Oct. 1 that its third quarter profit will fall to $2.2 billion,-- 60% below that of third quarter 2006, -- after taking $5.9 billion of trading losses and write-downs. Citigroup will write down loans for leveraged buyouts by $1.4 billion before taxes, and write off $1 billion in mortgage-backed securities and $250 million in collateralized loan obligations. But note, that, of $13 billion of subprime mortgage exposure on Citigroup's books, it only wrote down $1.3 billion, or one-tenth,-- clearly a ridiculous figure. And it is highly likely that Citigroup is keeping the many billions of dollars of its loans for collapsed leveraged buy-outs on its books, listed as "performing," until it can dump them into the new off-balance sheet Citigroup-KKR vehicle sink-hole.
At the same time, UBS bank announced that it will take a net third-quarter write-down of around 4 billion Swiss francs ($3.4 billion) tied to its subprime mortgage and mortgage-backed securities exposure, which gives the bank a $510 to $680 million loss for the quarter, its first loss in 9 years. But UBS still maintains on its books $19 billion in subprime mortgages, and a huge chest of mortgage-backed securities, which it did not write down.
In short order, Merrill Lynch investment bank, Bank of America, and other banks will be reporting their third quarter results. But don't expect them to tell the truth either!
