How to Capitalize on Citi’s Collapse
By Ryan Healy | November 25, 2008
So I had this hare-brained idea.
And it all started when I read Martin Weiss’s critique of the Citibank situation.
In fact, he believes it’s so bad, he titled yesterday’s editorial “Citigroup Failure Imminent.”
He wrote this yesterday… BEFORE the government agreed to bailout the Citi. Weiss predicted yesterday that the bailout would happen soon; it happened today.
Here is exactly what Weiss said:
They will soon announce a massive federal bailout that could make the $150 billion AIG rescue seem small by comparison.
And, ultimately, these kinds of bailout efforts will fail. [emphasis mine]
It is preposterous to assume that any government, no matter how powerful it may seem, can save the entire world. It is naive to believe that a few government bureaucrats, with a grab-bag of gimmicks and tricks, are a match for billions of consumers in revolt, millions of investors desperate to sell, and thousands of banks pulling in their horns.
The government cannot repeal the law of gravity and stop markets from falling. Nor can it turn back the clock to reverse our financial blunders.
All of this got me thinking. I’ve been getting a lot of balance transfer offers from the Citi.
Perhaps I should transfer my debt to them. And perhaps I should expect the Citi to crumble. And perhaps my debt will be buried in the rubble.
Get the picture?
If Citi totally went under, it seems to me all the debts would simply be erased. After all, how does a business that no longer exists collect on loans it made when it did exist? I just don’t think it’s possible.
Am I being unethical here to capitalize on the impending collapse of one of the world’s largest financial firms? Am I being foolish to think this way?
Leave a comment and let me know your thoughts.
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Topics: Bankruptcy, Credit Cards, Debt |
4 Responses to “How to Capitalize on Citi’s Collapse”
Comments
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November 27th, 2008 at 7:49 am
In discussing this idea with my Dad over dinner, he indicated that Citi would ALSO have creditors… and those creditors would “pick up the chase” (so to speak) to collect on the debts owed them.
I can see how this might happen.
My question: Wouldn’t Citi’s creditors involve foreign banks? And how would foreign banks collect on debts owed by U.S. citizens?
December 1st, 2008 at 11:23 am
Unethical? I’d say it’s walking a fine line. Doing it strictly with the hopes of a collapse that erases your debt is probably teetering on the brink of being unethical :-)
If you would have done it anyway, and the collapse does happen, I don’t think it is.
However, even if it is pushing the ethics envelope I’d probably try it. It’s not like the credit card companies are models of an ethical business.
Regardless of the ethics involved, I highly doubt that your debt would just disappear into the rubble. It’s more likely that someone else would buy the debt from Citibank for a large discount and they would take over the collection from you.
If that were to happen, it might still benefit you. For example, if another company bought the debt at let’s say 25% of face value, they might be willing to negotiate a lower payout for you. So you could possibly negotiate a deal to pay it off at 75% of face value.
They would still make a good return on their money and you would get a nice discount on the debt.
All theoretical of course, but there’s more than one potential upside to your idea.
December 1st, 2008 at 1:56 pm
Except Citi won’t declare chapter 11. They’ll be purchased by another bank, who will assume responsibility. Those debts are very valuable, and there is no way they’re just going to disappear.
December 1st, 2008 at 4:37 pm
@William - Thanks for the comment. Good observation. If Citi is bought out, then there may be room for negotiating a smaller liability.
@Shawn - Good point. I wonder, though… what if the bank that buys Citi then goes under because of all the bad debt they bought? What then?