No one is too big to fail, but many are too big to rescue.

Just ask Iceland. They tried, and lost their country.

Lehman taught us that it is extremely painful, but it can be done, and it teaches us all as consumers, investors, business owners and managers to act prudently, work hard, limit leverage and act sensible.

The old virtues that built the US needs to be restored, and this crisis will see to that it happens, by eradicating companies that can only survive on 2 % interest and underbid solid, decent companies with very low leverage that produces a good product.

Households must and will learn to live within their means once again, and that when you buy a house you put 20 % down and borrow no more than 3 times earnings. We all need to start saving again. Save for a new car, save for retirement, save for a rainy day, whatever, just save something!

“Citigroup is an unusually controversial company because its loan losses are at a level that suggests that the company would have difficulty surviving without government assistance,” wrote Bove. “

This is false. There is no question of whether Citi would have survived without a government bailout. It would not have and still might not.

“Bove argues that the government will support the firm while it sells or suns off bad assets, and that the resulting firm should be profitable, and, more importantly, worth more to investors than it is now. ”

So what? If he covered the auto industry, he probably would have said the same tning about GM. Just because a company is “too big to fail” doesn’t mean that the company won’t go bankrupt and shareholders will not be wiped out.

To shore-up its balance sheet, according to Bove, Citi needs to continue on its current trajectory. The bank increased its cash position by 90% to $190 billion, reduced its trading book by $243 billion, beefed-up its reserves by $13.5 billion or 73.6%, and removed the special investment vehicles since its near collapse.

The bank has a $2 TRILLION balance sheet. It added reserves by a patry $13 BILLION which is a 76% increase? That tells you how grossly UNDERCAPITALIZED they are.

EM

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