Felix Salmon brings us the news of how Citigroup is skirting its capital requirement:

At issue is a pool of $12.7 billion in assets, which is housed at Citi’s “bad bank”, Citi Holdings.

In 2008, Citi decided that these assets were not available for sale, and rather were going to be held to maturity. Presto — the bank no longer had to mark the assets to market, and could hold them on its books at par instead. And the difference between par value and market value went straight to Citi’s precious capital, helping it look stronger.

Now, in the wake of a massive bond rally. Citi has decided to switch the assets back. No longer are they held to maturity; instead, they’re available for sale. At a stroke, Citi has to recognize all the gains and losses in the portfolio immediately — that’s $1.7 billion in losses, and $946 million in gains. But the losses can be applied against profits elsewhere in the bank, to reduce the total tax burden. Which is nice, because we wouldn’t want too much money flowing from Citigroup to the taxpayers which bailed it out.

This clever trick included Citi going to its regulators and asking for this switch of the assets to satisfy the Basel III requirements, and the regulators… I don’t know, probably not even spending a second on the question before telling Citi to go for it. Citi now has the same assets, with the same risk attached, but they changed their classification, so they don’t have to hold as much capital behind them.

This is just an example of the banks taking from the regulators what they can get. And with regulators like the Office of the Comptroller of the Currency at the federal level, the banks should be able to get quite a lot.

Though, to be honest, calling the Office of the Comptroller of the Currency a “regulator” is almost laughable. The Environmental Protection Agency is a regulator. The O.C.C. is a coddler, a protector, an outright enabler of the institutions it oversees [...]

It has consistently defended the Too Big to Fail banks. It opposes lowering hidden interchange fees for debit cards, even though such a move is mandated by law, because the banks don’t want to take the financial hit. Its foot-dragging in implementing the new Dodd-Frank laws stands in sharp contrast to, say, the Commodity Futures Trading Commission, which is working diligently to create a regulatory framework for derivatives, despite Republican opposition. Like the banks, it views the new Consumer Financial Protection Bureau as the enemy.

And, as we learned last week, it is doing its darndest to make sure the banks escape the foreclosure crisis — a crisis they created with their sloppy, callous and often illegal practices — with no serious consequences. There is really no other way to explain the “settlement” it announced last week with 14 of the biggest mortgage servicers (which includes all the big banks).

The settlement, of course, is merely pre-emption by another name. OCC used pre-emption to stop states from looking at mortgage operations before the crisis, and they’re using it again, in the form of a settlement, to stop states from imposing penalties on the same mortgage operations after the crisis.

So this end run around capital requirements from Citi just fits a pattern of banks who stop at nothing to maximize profits and regulators who have no interest in stopping them, and who have in fact confused their mandate to protect the citizens of the country with a mandate to protect those bank profits.

To quote Chris Hedges, it’s really time to throw out the money-changers. And their overseers, besides.