How has the 2008 financial crisis affected Citigroup?  Let us the count the ways...

[ by Melanie Gretchen & The Compliance-Insights Chorus  ]

Imagine a Citigroup-themed pinball machine, and the object of the game is to run up the bank's legal costs - [Note:  The following scenarios are not intended to accurately reflect the cases to which we refer.  Some of the court decisions and levels of sanctions are included solely to facilitate our explanation of the scoring in this game.:  

BING:   FINRA fines Citi for Paying Lobbyists using Muni and State Bond Funds.  

CLANG:    The Appeals Court agrees with Rakoff that the $285Mn SEC settlement is "pocket change," and bumps that fine up to $1.25Bn.

BOINK:         Legal costs for alleged deceptive marketing of add-on products to credit card customers, first estimated at $529Mn, then raised to $1.3Bn, jumps to $3Bn when someone remembers to factor in card sales in China.

HEEEE-HAW-HEE-HAW-HEE-HAW: OOPS - got too close to the donkey while negotiating your way out of the mortgage foreclosure mess - those costs just got 'kicked' up to $7.6Bn.

No matter how you slice it, Citigroup's legal costs show no signs of letting up any time soon.  Just because Citi increased its reserves from $4Bn to $5Bn doesn't mean it can't go up again - next week or next month.  And that also goes for BofA, UBS, JPMorgan, HSBC, and many other rival banks.  Few of them are safe.

Concluding Thoughts.   We'll leave you with these final thoughts - - - - -

Before getting yourself worried sick about costs escalating out of control, why not follow Barclays's lead and make bank employees pay the costs of the fines out of their own pockets  - e.g., year-end bonuses, T&E budgets, restricted stock awards - to name a few.

Beware of downside risks, however - like putting employees under water - meaning, the amounts they owe to the bank may exceed their family's net worth.  We're not sure how that would work out.

From what we've just learned, we can derive a final reason for not letting things get to us at this stage of the game.  As bad as things may seem now, it's likely they're only going to get worse.

So, CEO Michael Corbat, we'll close with some tried and true advice offered by the legendary Nat King Cole.  He's expressed these sentimental lyrics countless times, who said through song lyrics:

"Smile though your heart is breaking
Smile even though it's aching
When there are clouds in the sky, you'll get by
If you smile through your fear and sorrow
Smile and maybe tomorrow
You'll see the sun come shining through for you

Light up your face with gladness
Hide every trace of sadness
Although a tear may be ever so near.
 

That's the time you must keep on trying
Smile, what's the use of crying?
You'll find that life is still worthwhile
If you just smile

[instrumental interlude]

That's the time you must keep on trying
Smile, what's the use of crying?
You'll find that life is still worthwhile
If you just smile."

 

 

For further details, go to [Bloomberg, 3/1/12].