Swept Under the Rug Monday: Gotta Chase Dat Paper

For those of you who don't read the financial or business pages of news sites or newspapers, there has been an interesting series of reactions from the sub-prime mortgage crisis.

The first item of note is that Citigroup, the largest bank in the United States, lost 57% of their quarterly profit margin, compared on a year over year basis. The BBC has a basic report, but Bloomberg has a detailed analysis of the company by unit. An analyst at another major financial institution that has suffered from the sub-prime crisis, Deutsche Bank, has cut Citigroup's shares to sell because of executive staffing problems.

The second item of note is that Citigroup, Bank of America, and JP MorganChase & Co., in association with the Department of the Treasury and Henry Paulson, have negotiated for the creation of what amounts to a bail out fund for the financial industry. In purchasing $80 billion in assets from Structured Investment Vehicles, which deal in sub-prime mortgage debt and corporate bonds, those involved in these negotiations have agreed to guarantee the investments of those SIVs that have the least amount of risk in their investment portfolio. The problem comes in when one considers that there is currently $320 billion in assets in this type of investment vehicle, so the owners of the other $240 billion are going to need a lot of antacid.