Citibanks are big, but compared with other commercial banks in the United States, not only did they hold subprime-related assets in this financial tsunami, but their breadth and depth of participation in the financial derivatives market are also difficult to match. As a commercial bank, Citibank was once the second largest dealer in the international financial derivatives market, with an asset portfolio value of up to more than 36 trillion US dollars!

Citibank can be said to be a typical representative of the integrated operation after the US banking industry broke the boundaries between traditional banks and investment banks. Objectively speaking, there is nothing wrong with integrated operation itself. The key is whether this strategy can be supported by its own core capabilities. Integrated operation in the banking industry has indeed greatly broadened the survival and development space of banks, but at the same time it has greatly increased the breadth and depth of bank risk exposure, and changed the scope and nature of bank risks. It includes conflicts of interest brought about by the complex organizational structure and cultural diversity, risks related to related transactions between financial subsidiaries, information disclosure risks brought about by differences in accounting systems and industry-applicable regulatory systems, and systemic risks brought about by the transmission of risks in the money market and capital markets.

The most important thing is that traditional banks like Citi have transformed into financial holding groups and are too active in the asset securitization market, causing many already transferred credit risks to recirculate again, and eventually the banks bear excessive risks. Since most financial holding companies are born from traditional commercial banks, their traditional internal control mechanism is difficult to effectively manage highly specialized and complex securities investment businesses, especially off-balance sheet securities investment businesses, which may become a "black hole" that drags down banks.

The main reason why Citibank has reached the point where it is about to go bankrupt today is that in 1998, the United States demolished the risk isolation between the banking system and the capital market. After the 1990s, Citibank changed its previous practice of mergers and acquisitions and expansion in the commercial banking field that it was more familiar with, and entered a relatively unfamiliar field - the investment banking field. In 2006, the proportion of various securitization products traded by Citigroup Group to 114 total assets reached, such as mbs, cdo, clo, cds, etc. Through the long-term securitization process, Citibank originally tried to transfer a considerable part of the credit risks to the outside world, but unexpectedly, things went against their expectations.

As an important participant in the US asset securitization trading market, Citibank itself is engaged in the acquisition of securitized underlying assets and the design, offering, underwriting and other businesses of securitized derivatives, as well as securities product trading business and related credit support business in the secondary market. The overly complex financial derivatives business has not discovered it. Its internal control agencies previously believed that the credit risk transferred was actually quietly recycled to another internal department of the bank through capital and derivatives market business.

Citibank is also a major dealer in the primary and secondary markets. The risks contained in securitization products issued by many other banks have also been concentrated on Citibank. Multiple crises broke out, making Citibank doomed. During the rapid expansion of 1999 to 2003, Citibank had an average annual merger and acquisition transaction amount of more than US$10 billion. It quickly developed from a traditional commercial bank to an all-round and global financial holding group that includes banks, insurance, securities, trusts, etc. The asset size jumped from about US$200 billion to a giant of US$2 trillion, which increased by more than 10 times, but it also caused a fatal problem. Even if these off-balance sheet assets suffered losses of 10, Citibank would be insolvent.

As a result, as soon as the financial tsunami arrived, Citibank was busy selling a large amount of subprime assets in his hands, but unexpectedly, the financial derivatives department that was not closed in time continued to create more toxic assets, so he had to tear down the east wall and repair the west wall until no one dared to invest money to make it continue to make up for it. Only then did Citibank realize that most of its financial derivatives had fallen into vain and had to bear huge losses. Citibank's original assets were more than 2 trillion US dollars, and had more than 200 million customer accounts in 106 countries and regions around the world. It is the world's largest financial empire, but overnight it "played" to the point where it would be worthless if it did not accept external rescue. The lesson was profound.

When Yang Xing led the overseas bottom-buying group to acquire Citibank assets at a low price, he analyzed in detail the causes of Citibank's crisis and also specifically reminded domestic financial regulatory authorities to pay attention to this risk. At present, domestic commercial banks are all "mixed" operations, and have inherent shortcomings in financial derivative risk management. It is often difficult to clearly understand the risks, let alone manage them.

Most of the 4 trillion yuan of rescue funds launched by the state are issued through the banking system, and in many infrastructure projects, local governments also need to provide funds to cooperate with the central government to allocate funds. Since local governments do not have the right to issue debts, many guaranteed financing companies have been established in disguise to operate from bank loans. Since most government and enterprise functions of domestic banks are not completely separated and cannot refuse local government instructions, many loan assessment and delivery goals do not comply with economic laws.

Once such loans have problems, it will lead to a large number of bad debts and bad debts. In order to solve the huge bad debts of several major commercial banks, they had to divest these assets and set up four major asset management companies to solve the problem. Now the old accounts have just come and new accounts have arisen. In order to lower the bad debt ratio, the easiest way for domestic banks to adopt is to package the problem assets and make them into so-called "wealth management products" to market.

According to Yang Xing, most of the buyers of these wealth management products of domestic banks are ordinary depositors. In order to attract them, many banks' wealth management products use the trick of issuing new bonds to offset old bonds. Yang Xing therefore advised the central government that the United States paid a heavy price for the subprime mortgage crisis, and the huge domestic local debt and bank wealth management products are also time bombs. Citibank is the lesson of the past, so don't repeat the same mistakes!

Citibank's announcement of bankruptcy is much bigger than Lehman Brothers, in terms of scale and market influence. If the US government does not save Citibank, the blow to the US and the world's finance and economy will probably be much more severe than the global economic impact caused by Lehman Brothers' bankruptcy. Therefore, the US government cannot let it go no matter what, and it is really "too big to go bankrupt."

However, in view of the newly issued strict restrictions on the "big to failure" company rescue, on October 24, 2006, the US government, the Federal Reserve and the US federal insurance companies jointly issued a statement, raising harsh conditions for Citibank to implement a package of rescues on the brink of bankruptcy.

First, the US government took out $80 billion from the $850 billion rescue plan to invest in Citigroup and obtained its preferred shares of 40 yuan. Citigroup announced that it would split it into $200 million in assets and allocate it to the new Citigroup Bank, and the remaining $850 billion in non-core assets were transferred to Citigroup Holdings, marking the end of the era of Citigroup as a financial supermarket.

In addition, the government stipulates that in the next three years, without government approval, Citibank shall not pay more than US$001 per share in the dividends of ordinary shares, and must comply with the regulations that cap the management's salary and welfare system. The government provides guarantees for Citibank's $306 billion in non-performing assets, and the four companies have signed a loss sharing agreement, but Citibank must digest most of the losses caused by US$306 billion in non-performing assets by itself.

Third, the Federal Reserve provides certain loans to risky assets other than US$306 billion and invites external investors to acquire them. After the government "nationalized" Citibank, it also welcomes investors from other countries to acquire Citi shares. The US Foreign Investment Commission will give the green light for this, and even the country's sovereign investment funds will have no problem.

This is a huge discount. You should know that Americans say they like free trade, but they come to the United States to invest, especially when they see that they are picky about investments in other countries. Not long ago, CNOOC failed to acquire Unicorn. But now, Americans have to make concessions. The financial tsunami has caused great damage to European and American countries. Previous economic democracy has had to give in to self-rescue. The bankrupt Icelandic government chose to cut off its arm and sell large tracts of land to foreign investors. The Greek government even considered selling some ancient artworks to pay off its debts.

Citibank has previously sold a lot of financial businesses in the region to Japan, India, France and Germany. Now the group is divided into two parts, and the first thing it needs to retain is the traditional bank where it is its foundation. As for the Citibank, which has assets of up to US$850 billion, it obviously wants to put it on the auction table and wait for the price, so it doesn't care whether it's for the Chinese to buy it.

In fact, Americans originally planned to sell sovereign funds to some countries that are close to their own relationship. After all, there are so many private companies in the world who are willing to take over such a large plate. However, Europe, which has the closest relationship, has not yet dissipated due to the debt crisis, and is unable to do so. Although countries such as Iceland and Cyprus have temporarily stopped the EU and no longer continue to slide down the abyss, the problems of other European pig countries have not disappeared, and are still struggling in the mud.

The Spanish and Portuguese governments fell one after another, and Yang Xing's close friend Berlusconi, Italy, did not retain his throne. Fitch took the initiative to lower the credit rating of seven European countries, including France, before Citibank's accident, resulting in the debt problems of new alliance countries such as Hungary, Czech Republic, and Latvia. Compared with old Western countries, the financial situation of these countries is quite bad and is regarded as the source of the next wave of crisis. The EU quickly launched the European financial stability fund EFSF, proposing to use 400 billion euros of rescue funds to rescue EU countries.

In this case, although Norway and other Nordic countries, where Europe's largest sovereign fund are located, are not members of the EU, they have lost their lips and teeth. Even if they are used, they must first consider political factors and save European countries first. They can only express their inability to acquire Citigroup assets. In addition to Europe, Saudi Arabia and UAE sovereign funds in the Middle East have to deal with the crisis in Dubai, UAE. As a result, they have to pick and choose, and they can only afford Asian countries such as China and Singapore.

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