Citigroup Avoids Bankruptcy, Will Citizens Fare as Well?

Nov.25.08 | About: Citigroup Inc. (C)

I just read a MUST read article on Bloomberg! every reader must check out. If you thought the $700 billion bailout was big news…

The U.S. government is prepared to provide more than $7.76 trillion on behalf of American taxpayers after guaranteeing $306 billion of Citigroup Inc. (NYSE:C) debt yesterday. The pledges, amounting to half the value of everything produced in the nation last year, are intended to rescue the financial system after the credit markets seized up 15 months ago.

The unprecedented pledge of funds includes $3.18 trillion already tapped by financial institutions in the biggest response to an economic emergency since the New Deal of the 1930s, according to data compiled by Bloomberg. The commitment dwarfs the plan approved by lawmakers, the Treasury Department’s $700 billion Troubled Asset Relief Program.

A lot of people are talking about the $700 billion bailout, but few have been talking about this. I’m astounded. Speechless. Oh, right, the Federal Reserve is in charge. It actually doesn’t surprise me.

The article goes on to say:

Most of the spending programs are run out of the New York Fed, whose president, Timothy Geithner, is said to be President- elect Barack Obama’s choice to be Treasury Secretary.

‘They Got Snookered’

The money that’s been pledged is equivalent to $24,000 for every man, woman and child in the country. It’s nine times what the U.S. has spent so far on wars in Iraq and Afghanistan, according to Congressional Budget Office figures. It could pay off more than half the country’s mortgages.

“It’s unprecedented,” said Bob Eisenbeis, chief monetary economist at Vineland, New Jersey-based Cumberland Advisors Inc. and an economist for the Atlanta Fed for 10 years until January. “The backlash has begun already. Congress is taking a lot of hits from their constituents because they got snookered on the TARP big time. There’s a lot of supposedly smart people who look to be totally incompetent and it’s all going to fall on the taxpayer.”

My, oh my. It’s funny how they use that money to help the big corporations on Wall Street. I wonder what would have happened if they just paid off half the mortgages in the United States instead? I’m no proponent of any of these activities, but wouldn’t it have been smarter? The consumers would pay off their mortgages, the people holding the mortgages would get their money back (so the banks would get money), and the consumer could start spending again with a fresh start. I don’t like it, but wouldn’t that have made as much sense?

Instead what they have done is given money to the banks so they can lend to people - but the people are already maxed out and up to their eyelids in loans. If anything, the people will have to declare bankruptcy in order to see their share of this government bailout. In terms of the entire economy, if the consumer isn’t spending money or is forced to go bankrupt, then the economy won’t recover as planned anyways. In fact, if many consumers must declare bankruptcy, they will also be black listed for a few years. Either way, these “bailouts” seem flawed and the only winners are the largest banks and the Federal Reserve.

I certainly wish none of this occurred at all. We are handing over so much power to Wall Street, the big banks and the Federal Reserve, that it is down-right scary. My guess is the big banks will be buying smaller conservative banks that aren’t in trouble. Government funded consolidation! Even if they don’t go on a consolidation binge, why is it that government bails out the bankers but not its own citizens that owe the debt? We shouldn’t have to sue to get information about our own tax payer funds either - talk about power transfer. When we, the people, have no say over the government funds, there is something fundamentally wrong. Transparency anyone?

Bloomberg has requested details of Fed lending under the U.S. Freedom of Information Act and filed a federal lawsuit against the central bank Nov. 7 seeking to force disclosure of borrower banks and their collateral.

Thank you Bloomberg! How much of this information would be public (in the main stream media) if it weren’t for Bloomberg? Why does Bloomberg have to sue in the first place?