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A Note To Ben, Hank, And Vikram

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Saving the individual home owner is going to take more than a little rate freeze.

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Dear Ben, Hank and Vikram:

My Santa letter is out the window and I am willing to accept the fact that this year we may have to settle for coal. Ironically the relative strength in Peabody Energy (BTU) should have given us a clue.

Rather than pen a piece for the North Pole, I thought it better to write some of our dear friends.

Ben, First of all, hang in there. You are in a tough spot and I can't imagine doing what you do. We have already had a pretty rocky relationship. The whole Maria Bartiromo thing really screwed me up, however I let that go after your surprise 50 basis point cut. Now however, this wishy washy way in which you're handling the credit crunch has to go. Aside from the poor timing of the announcement, we all know that a $40 bln infusion isn't going to cut it and whether you like it or not, the financial markets aren't too impressed. While I have no clue what the answer is, the bottom line is we need to see you pack a punch and take the bull by the… um, bear by the tail and shake this stuff up a bit. Yes, I am a trader but I am also a citizen and I have to gain a little security when I hear your plans. So far, I am not feeling secure.

Hank, I'll save the pep talk because I know you can handle the heat, but from my vantage point it's as if you're trying to bail water out of a sinking ship with a spoon. We all know you understand the art of perception and the mortgage plan has helped that, but c'mon, in all reality will a freeze really work? Isn't the plan really putting a band-aid on a massive wound? It's unfortunate, but companies need to go out of business. Alesoc Financial's (AFN) drop from $11.99 to today's price of $3.90 or American Mortgage Acceptance (AMC), which is currently trading at $1.63, down from $19.87 this year, is clearly telling us the losers are dropping out while Fannie Mae (FNM) and Freddie Mac (FRE) are starting to look as if they will live to fight another day. Let's let the free markets work this out, but if you want to save the individual home owner, it is going to take more than a little rate freeze. It is sad to say, but debt is going to have to take care of debt here, and let's just bite the bullet and allow these individuals to refinance for a 50-year note at a fixed rate.

Vikram, Welcome to Citigroup (C). I am sure you are well qualified and I am looking forward to see what you have in store. All eyes are on you and your stock and you really do have the opportunity to set the stage for other banks. I think everyone agrees that your move to bring back on the balance sheet your Structured Investment Vehicles (SIV) was a good one but please come clean with the fact that you really have no clue what these assets are worth. Furthermore, if you have to cut the dividend, just cut it and get it over with. We're resilient and we can handle it, but taking major investments from sovereign funds and paying them major interest may not be the best solution to handle liquidity issues. At this point, we're more interested in pure honesty even if it is painful. Let's get all the dirt out in the open and deal with it.

Sincerely,
Quint

Positions in BTU, C

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