Then, after I wrote the post, I came across this gem via Calculated Risk:
"Citigroup Inc. (C) priced a $5 billion government-backed bond Tuesday, its second benchmark-sized bond offering this month under the U.S. Federal Deposit Insurance Corp.'s Temporary Liquidity Guarantee Program, according to a person familiar with the situation."
Wow. Wow. Can I say WOW again? If the FDIC is broke, which they are, then why is the TLGP program still going?!! Ken Lay would be proud - Citibank issues debt guaranteed by the (broke) FDIC. Then, Citi prepays a few years worth of fees to the FDIC, so that they'll have money to, amongst other things, be able to make good on the debt they just guaranteed for Citigroup! If you plugged this into Excel, you'd get a "#N/A" circular reference error.
Perhaps it went down something like this:
Vikram Pandit: Citi CEO
Sheila Bair: FDIC chair
Pandit: "Hey Sheba - what's shakin'? Look - We need to issue some debt under the TLGP - no problem right?"
Bair: "Hi Vik - ummm - actually, I don't know if you got the memo - we're broke."
Pandit: "That's ok Sheba - you won't actually have to pay out on the debt - it's guaranteed."
Bair: silence... "Sorry Vik - I don't follow."
Pandit: "It's guaranteed - RISKLESS! The full faith and credit of the FDIC stands behind it."
Bair: annoyed... "But Vik, I don't have any money to guarantee it."
Pandit: "You old fuddy duddy - don't worry about that - we'll use the proceeds of the debt sale to prepay our FDIC fees for the next three years - then you'll be able to cover us - simple math!"
Bair: hesitant... "ummm. Ok Vik - what happens when you need to payback the debt?"
Pandit: "Where have you been Sheba? We'll just issue new debt! Voila!"
Bair: "Genius, Vik. Do it up! GUARANTEED!"
Ponzi lives. Smoke and mirrors.