The Curious Capitalist asks ....

....How much of Citigroup could the FDIC actually take over?

FDIC chairman Sheila Bair doesn't think a full government takeover of Citigroup and other multinational financial institutions is practical or even possible. Here are her reasons, as summarized by Pete Davis:

1. The legal authority to take over large banks does not currently extend to multinational financial conglomerates;
2. The FDIC lacks the funding to conduct such a massive bailout;
3. Other countries have regulatory oversight of these financial conglomerates too, and they may object to a U.S. takeover.

This made me curious as to how much of Citigroup was a domestic commercial bank that the FDIC could take over, and how much was multinational financial stuff outside the FDIC's jurisdiction. So I took a look at the balance sheet from Citi's new 10K (pdf, with numbers as of Dec. 31, 2008).

First, there's .... .... ....

To repeat: Citigroup has liabilities of $1.797 trillion. The deposits that the FDIC has some responsibility for (up to $250,000 per depositor) add up to $241 billion. So we have this reasonably sensible system for winding down troubled banks, but when it comes to the most troubled big banking company in the country, said system only covers a fraction of the overall operation. Which leads to a couple of conclusions:

1. I get why the administration is so reluctant to take over Citi completely.

2. I don't get why we all (I'm including myself in this) thought it was okay to allow the creation and growth of gigantic financial companies for which we had absolutely no plan for winding down in case of trouble.