Wachovia sold to Citi by FDIC -Bush administration is insa

I can not believe what I read on the ticker, that the FDIC sells the banking operation to Citigroup and Citi has to take a 42 bil. loss - wholy crab - Citigroup is basically bankrupt they cannot afford to shop for 1 cent of losses. Ms. Whitney from Oppenheimer is astonished as well - the only person to upbeat about the whole situation for my taste is Warren Buffett that refers to his market call that markets are good value at 1250 and the next is that the bailout plan is a winner. He is short 40 bil. of notional Index puts that will make him medium term being long MARKETS to full extend even with cash.
The crazy thing is the wild way they bailout banks, every deal is cut different and this inconsistant behaviour undermines the faith of the markets into their ability to control the situation. Again they gave a backstop since they share part of the losses Citi wll have to take by the Wachovia assets - this is like in a bad nightmare you wish to end - but it does not. They are cherry picking who survives and who not and thats not the duty or choice of an administration. Now Citi raised themselve to a size which is too big too fail by any means and I think they will be a big time participant on the bailout program with a possible 65 cents on the dollar they will suck in a huge chunk of those funds- I would guess 100 bil. minimum even much more they need to do.
Actually the subsidies which Citi will receive have a lot to do with the shareowners in Citi - some serious amount of Saudi money has been invested there and the Bush's have strong links with them so its not only the taxpayer being protected here.

Second part

Now I get a clear picture about the Wachovia deal ,they arrange things in the background for Citi to survive on the back of taxpayers. Citi got a good deposit network through Wachovia ,so far the financed their balance sheet by 22% with Wachovia it jumps considerably. In the chart you can see that the Wachovia assets tripple the deposit ower which makes sense since they are more independent from borrowing money at markets or the FED.

But lets see the real deal is that they took 42 bil . in losses from Wachovia for 12 bil. in warrants. The trick is that Citi has big chunks of BBB tranches of toxic stuff to unload which basically are only worth 10 cents they sell that for 65 cents to Mr. Paulson for 200 bil notional that gives them 110 bil of activated capital which was only worth 20 bil. So even after taking a 42 bil. plus 12 bil. hit they still are ahead 38 bil. When Paulson gets the second 350 bil. they can sell right into it another 100-200 bil notional for 65 cent and another 55 to 110 bil comes in cash to their balance sheet. Bankruptcy avoided but do not believe for a second that the taxpayer will ever make back the 65 cent it had to spend.
Vikram Pandit was bought with his Hedge fund from Citi for 800 mil. that fund is not worth a cent today he made already a killing on Citi so even if he gets a salary cap. that is not realy a problem for him or his other executives who were partners in this fund.