The Fed’s Contradiction With the Government

News has it that Citi Bond Sale Shows Strength

This is the first time the financial institution has sought financing away from the protection of the Federal Deposit Insurance Corp.’s Temporary Liquidity Guarantee program begun in November. Demand was strong, with orders exceeding $6 billion, according to one person familiar with the deal.

I don’t feel surprise to see any of the 19 banks participating the stress test are able to sell bond without FDIC’s protection simply because the Fed chairman mentioned in the public that none of the 19 banks are allowed to fail. Why would anyone need FDIC’s protection when the Feb is standing behind? At the same time the government said that only banks that are able to sell debt without FDIC’s protection are able to repay TRAP. With this contradiction I am not sure if this a good news for for Citi group and the banking sector. Basically any of 19 banks that don’t need to raise capital will be allowed to repay TRAP it is a matter of whether they want to do so. And the ones that do so will certain stand out of the crowd.