Markets tank again; GM and Citigroup lead the way

As of 2:30 PM today, the Dow was down 260 points to 6.612. And The One didn’t even mention the economy today. And Timmy hasn’t been in the news. Hmm. I guess this is just reflective of how the markets see the assistance from the government.

The Dow is down more than 50% from its high of 14,164 on October 2007. February 2009 is the worst February for the Dow since 1933.

“The Dow, which dropped 12 per cent this month, had its worst February since 1933. During the month, 20 of the 30 components reset their 52-week lows, with 13 hitting 52-week lows at some point during final session of the week.”

Citigroup’s stock finally fell below the $1 threshold. Welcome home, dear! I thought the feds were going to prop up Citi after their announcement last week about converting a few billion dollars in preferred shares to common stock. That would give the feds 36% ownership in Citi. Looks like that was a great idea..

Oh yeah, and GM is saying today they may have to go into bankruptcy to help restructure. Why didn’t they say this $50 BILLION ago? Once again, the government offered a band-aid to something that needed to be amputated. If GM is going to have to declare bankruptcy to get straight, they should just suck it up and do it. Bankruptcy would allow them to void their union agreement so that could be restructured as well. Every time they’ve been give BILLIONS, they come back to the trough like pigs a few weeks later wanting to get some more. Unfortunately, President Obama promised in his speech to Congress last week that he would not let them fail.

While the American auto makers are crying, why haven’t we heard any screams from Toyota, Nissan, or Honda?

Citimortgage announces Loan Modification Program

Citimortgage announced yesterday it had its own loan modification program. Under the program, home owners have the option to pay around $500 a month on their mortgage for three months if they meet certain criteria. Citimortgage is targeting those homeowners that are unemployed and perhaps behind in their payments. This is a great idea from Citimortgage and it’s time for more companies to propose something along these lines.

This proposal allows people to stay in their homes and also keeps the asset on the books for Citimortgage. Hopefully, this is more than a stopgap measure and homeowners will take advantage of this offer. They are even freezing credit reporting during the process as well. It is a win-win for both parties. Citi would loose a lot more if the house went into foreclosure than by asking someone to pay what amounts to rent on a one-bedroom apartment in most cities. It also protects other homeowners because this should help stabilize some property values.

This does what the government has tried to do through two pieces of legislation. It tackles the original problem of the economic turn we are in. It goes after home foreclosures. Once again, a business based solution trumps government.

This follows on the heels of Freddie Mac and Fannie Mae’s plans to rent foreclosed properties. Many renters were being evicted because the owners were being foreclosed upon, affecting the innocent tenants. While still being owned by Freddie (and in effect, the government) the plan keeps the homes occupied and from falling into a state of disrepair. Just like the Citi plan, it helps to stabilize home values and keeps a stream on income on the asset instead of letting it sit.