As we watch Citigroup (NYSE:C) continue to trade above 4.20 a share, I have to ask investors what they are driving this stock price up on? Certainly with the recent news that the government would like to divest itself of its shares, the price per share of this equity theoretically should drop. Also amid all the recent speculation, we are seeing bits and pieces of a massive fraud and lack of competence among the Mortgage and Banking industries with Citigroup smack dab in the middle of it all.
Recent information from a former executive with Citigroup suggests management ignored an internal warning that most of the mortgages it was selling were defective. This former executive testified to this on Wednesday. Other former executives at Citigroup and New Century Financial told the Financial Crisis Inquiry Commission on Wednesday how their firms contributed to the creation and selling of subprime mortgages and mortgage backed securities that created and sustained the housing bubble prior to its implosion. Among the testimony were revelations that exposed some very serious allegations. One of which was Richard Bowen, who was business chief underwriter during his time at Citigroup, testifying that he warned executive committee chairman Robert Rubin about the destructive business practices occurring in the company’s mortgage arm. Bowen also stated he discovered in 2006 that “60 percent of the mortgages bought and resold by the company were defective,” meaning they were not up to Citigroup minimum standards or guidelines. When asked how Rubin responded, Bowen replied, “I received a very brief phone call from a general counsel within the company. He said they were doing background research and didn’t need to talk to me.” Astonishing revelation if true and very revealing of the extent of corporate greed at Citigroup at the time.
Read the rest of this entry »
