Courtesy of Pam Martens.
From Federal Reserve Photo Archives
It only took three press releases over as many days but the Federal Reserve finally spit out the truth yesterday on its stress tests of the big banks: Citigroup, the largest bank bailout recipient of 2008, still doesn’t have its house in order more than five years later. How many more years of economic malaise will it take before the delusional Fed admits to the public that only the restoration of the Glass-Steagall Act, separating banks holding insured deposits from gambling casinos on Wall Street, will put our financial system back on sound footing?
The Fed’s comments on Citigroup yesterday included the following:
“While Citigroup has made considerable progress in improving its general risk-management and control practices over the past several years, its 2014 capital plan reflected a number of deficiencies in its capital planning practices, including in some areas that had been previously identified by supervisors as requiring attention, but for which there was not sufficient improvement. Practices with specific deficiencies included Citigroup’s ability to project revenue and losses under a stressful scenario for material parts of the firm’s global operations, and its ability to develop scenarios for its internal stress testing that adequately reflect and stress its full range of business activities and exposures.”
As a result of flunking the stress test, the Fed has barred Citigroup from raising its dividend or boosting share buybacks without a resubmission of its plan and specific written approval from the Fed.
During the financial crisis of 2007 to 2010, Citigroup caused more Fed nightmares than any other bank, eventually soaking up $45 billion in equity infusions, over $300 billion in asset guarantees and more than $2 trillion in below-market rate loans from the government.
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