Capital Purchase Itself Does Not Unlock Credit Markets
Peter Peyser spoke with BusinessWeek regarding toxic assets in context with Citigroup’s partial sale of Smith Barney to Morgan Stanley. This action raises flags that Citi needs more fresh cash to make up for coming losses.
In November, the federal government wrote Citi an insurance policy on $306 billion of toxic tort assets, and Citi must cover the first $29 billion of losses from those assets.
"We may have to come back to the issues that were at the heart of original congressional action, which was about the toxic assets," says Mr. Peyser. "The judgment was made that capital purchases were more important immediately, and that may well be true. But the capital purchase has not been by itself the thing that unlocks the credit markets and gets the banks lending to one another, much less consumers and businesses."
“Citi: The Losses Keep Coming” by Mara Der Hovanesian and David Henry, appeared in BusinessWeek on January 12, 2009. For more information, please visit www.businessweek.com.