Normally taking extra risk onto a bank balance sheet and getting a debt downgrade would not be considered good news. Citigroup (C) brought $49 billion of SIV debt in-house and, for unrelated reasons Moody’s cut its rating for Citi.

Goldman Sachs thinks that the moves make Citi bonds a good investment. In other words, things are better than they appear, and the debt will outperform similar investment.

According to Reuters: "Goldman said it believes the newly appointed Chief Executive Vikram Pandit will take appropriate action to raise capital levels in the first quarter either through additional third-party investments, dividend cuts or reduced risk-weighted assets."

Goldman and Moody’s can’t both be right.

Douglas A. McIntyre