Citigroup Avoids Bankruptcy, Will Citizens Fare as Well?

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. (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?

Comments

[who:]

Did you see Citi exec's coming out on CNN and saying they were going to buy other banks toxic assets and hope make a killing in the long run?

I think the fed and treasury know what is happening and looking to benefit when loose their jobs when Obama sits in.

2008 Nov 25 03:11 AM

[C.elder:]

Without Citi,the whole economy is bankrupt .Every other bank,insurance company and corporation in the U.S. depends on Citi.Either they have borrowed from Citi,or lend to Citi,or have Citi shares,or deposits with Citi,or FX,or derivatives,or individuals have mortgages,college loans,pensions,car loans etc etc.Without Citi,NONE of these things can continue.And please don't say the other banks will step up as they are stretched as it is,and they will go down,if Citi goes down.
The real question is why the Govt continues to allow a small group of people to short the banks and drive down their stock prices,making a huge amount of money in the process for themselves,while causing a major catastrophe for the country?The shorts then turn their attention to the next bank,and then the next and when they run out of banks,it will be the turn of the insurance companies.The shorts will get huge bonuses,and the Govt will end up with all the collapsed banks anyway.Much smarter to not only ban the shorts,but impose a large tax on all short profits retroactively to the beginning of 2008 to help pay for the bailouts.This will stop the shorts from profiting from the destruction of the banking system and help offset the cost of the bailouts.
And by the way,if deadbeat americans paid off their loans as they are supposed to,none of this would have happened!

2008 Nov 25 04:26 AM

[Robert Nabloid:]

@who: I didn't see the CNN program as I no longer pay much attention to the MSM which seems to gloss over crucial details far too often.

"I think the fed and treasury know what is happening and looking to
benefit when loose their jobs when Obama sits in."

I don't think they will lose their jobs. Obama has actually promoted quite a few of them into high government positions! He's done exactly the opposite you would have expected and has rewarded the big bankers and Federal Reserve that has failed us so miserably by promoting them to top government jobs and expects them to help him fix the problem they created in the first place. Is it any wonder their banks are getting the bailout money while average joe schmuck is still stuck and unable to pay his mortgage or without a job? They've already been given the equivalent of $70,500 for each of the 105 million households in the US... though that is probably much higher now as that figure was more than a week ago. Honestly, look at what they have managed to do in 6 short weeks... a banker take-over, not a banker bailout! Obama and McCain were both in favour of it too.


On Nov 25 03:11 AM who wrote:

> Did you see Citi exec's coming out on CNN and saying they were going
> to buy other banks toxic assets and hope make a killing in the long
> run?
>
> I think the fed and treasury know what is happening and looking to
> benefit when loose their jobs when Obama sits in.

2008 Dec 02 02:35 PM