The Meltdown

Citi "Too Big to Succeed"

What’s next for Citigroup? An editorial today in The Wall Street Journal recommends the bank be dismantled. “A bank that consistently has to be rescued by taxpayers lest it take down the entire financial system is too big to succeed. The only way to protect taxpayers is to reduce the size and scope of the bank so that it no longer poses a systemic risk.” At Portfolio, Felix Salmon writes, “The problem, of course, is how on earth to get there from here.” The present idea seems to be to spread the bad debt across the many divisions, which will be sold off, but Salmon suggests that Citi keep the debt and spin off its divisions without any debt. “If you are going to create a bad bank, though, putting the dodgy assets in Citicorp seems to me to be much more sensible than trying to attach them to anything else. After all, Citicorp was insolvent once before, during the debt crisis of the 1980s, and it managed to emerge from that crisis, thanks partly to [John] Reed's leadership. Maybe he could manage the same feat again.”