So the Treasury and the Fed are working Sunday’s again; this time with an ad hoc and reactive bailout of the hapless Citibank. Even by the standards of this crisis they have plunged to new depths of incompetence, inaction and arrogance. And all because they knew they were too big to fail. A case study in moral hazard. It’s worth noting that the initial capital injection the authorities have agreed to is bigger than Citibanks puny $20.5bn market capitalisation as of last Friday. Goes to show once you start bailing out banks you have to keep doing it over and over again. Will the bailout stretch to infinity? Maybe we should call Buzz Lightyear.

New Treasury Secretary Tim Geithner
The catalyst for the Dow’s abrupt reversal late Friday was news (and you read it first here!) that NY Fed bank chief Tim Geithner had been given the toughest job on the planet: Treasury Secretary with the new Obama administration. Given this guy has been involved in every major decision for the last 18 months, I really wonder what fresh thinking he’s going to bring and the equity rally bamboozles me. Some believe he’s a great pick though.

Today’s Market Moving Stories

• In the U.K. the NIESR have forecast 0.8% growth for 2008 dropping to –1.5% in 2009 while suggesting that there is scope for another 1% off base rates. Meanwhile the RICS are predicting a loss of 300k construction jobs unless the government brings forward construction projects. And speaking of the U.K government, reports are that their borrowing will top £100bn in 2009. Shades of old bushy eyebrows Dennis Healy and the IMF. The German newspaper Bild sees 130k more jobless in Germany in 2009. Looks a very conservative call to me particularly as representatives of the auto industry are talking of 60k layoffs in that sector alone in the coming months.
• The Browned off UK public will be hit with the top tax rate hike to 45p today. VAT will be cut but what is needed is the abolition of stamp duty.
• The WSJ is reporting that Hank Paulson will ask Congress to release the 2nd $350bn tranche of the TARP before the Obama administration takes over. The Treasury plans to contribute $25-100bn to a new loan program aimed at auto, student and credit card loans as defaults on these have spiralled. The paper also carries a story saying that several GM board members favour chapter 11 bankruptcy.
• Obama is planning a new stimulus plan with over $500bn in Federal spending and tax cuts over the next two years. This is aggressive and we should get more meat on the bones of this ambitious plan at a press conference today when he wheels out his new economics team.
• In central banks chatter Philadelphia Fed President Plosser (a hawk) said the Fed is committed to making sure that deflation doesn’t turn out to be a serious concern but at the moment he us “not too concerned” about it. And Austrian ECB council member Nowotny sees a “long and stony way” to the end of the current crisis.
• Standard Chartered in planning a $3bn rights issue at a stunning 47% discount to the current market price. Japan’s Nomura is also looking to raise capital and the Swiss government may be called up to assist their own back hole UBS.
• There are reports that the Netherlands Rabobank is looking at buying troubled Irish building societies EBS, Irish Like and Permanent and even part of Irish Nationwide. Interestingly the current CEO of EBS Fergus Murphy was once country head of Rabobank in Ireland. These three building societies are thought to be far too small to survive as independents in the current environment.

Data Today
The main number today is the key IFO survey of economic sentiment from Germany. This is keenly watched by the ECB and if it echoes recent PMI reads, we should see it nose dive today giving more ammunition to those calling for a more than the currently excepted 50bp interest cut. Indeed the number has just flashed up with all three of the sub component indices coming in much weaker than expected (now how many times have I said that of late?)

Remember that it’s Thanksgiving (for what you might ask) on Thursday so volumes and liquidity will be down. We will be prone to even more jerky moves than usual!

The UK has their pre-budget today and Mr FT will be covering it.

And Finally…

Disclosures = None