Citi Bites the Hands That Feed It

By Patrick Watson

People on Fox News Channel and other conservative outlets charge that the government is taking control of private business. Those saying this should know better. The reality is quite the opposite: private businesses, and specifically a few large banks, have taken control of the government.

Worse, the bankers are using their control of the political system to line their own pockets while extracting cash from the very people who recently saved their bacon. The looting that is now underway makes New Orleans after Katrina pale in comparison. Consider Citigroup (C). Citi is, you will recall, a bank that continues to exist only because both Bush and Obama administrations granted it billions in emergency financing on laughably favorable terms.

We, the American taxpayers, now own approximately one-third of Citigroup. Call it socialism if you wish, but logic suggests that as owners we might get a break from those who owe their continued income to our generosity. No such luck. In fact, if you have a Citi credit card, the bank is spitting in your face by raising your interest rate.

What is Citi doing with this extra cash flow? Increasing salaries for top executives by up to 50%, of course. Never mind that these same people would be earning salaries of zero if the rest of us had not bailed their firm out of its insanely stupid risks.

Wait, you may say. These are talented people. They deserve to be well-paid, and the bank has to protect itself from credit risk. True enough, except that this is a bank that is still issuing no-doc, no appraisal mortgages more than a year after the housing market began to crash. Why should such monumental incompetence be rewarded?

Meanwhile, those not lucky enough to be employed by Citigroup are facing stagnant wages, if they are making any wages at all. The official unemployment rate is now 9.5%, and more than 16% by some measures. The average work week stands at 33 hours, the lowest since 1964, as employers try to avoid layoffs by reducing overtime and imposing furloughs. All the while, Citigroup execs have been transferring money from your pocket to theirs. The IRS, Treasury, and Federal Reserve merely serve as intermediaries.

So the question remains: who is controlling who? The idea that the federal government is somehow oppressing banks like Citi is insane. You, the taxpayers, are the ones being oppressed here. The fact that the top executives and directors of Citi still have their jobs after all that has happened tells you everything you need to know.

The reality is this: heads the bankers win, tails the taxpayers lose. It’s been going on for a long, long time and is not going to stop anytime soon. Happy Fourth of July.

Disclosure: No position

Comments

[Pottermus:]

Amen. I do have a question. If Bernie Madoff got 150 years, the man will be well over 200 when relesed, what should these bankers serve?

Maybe rippimg off people, not economically or politically as the elite, is sort of OK.

Well we had a Revalotionary War and Civil War to get things right. Neither seemed to have worked. Any ideas out there on what to do next?

Jul 06 10:51 AM

[Ouch$:]

The American people should be marching on the Washington Congress and clean house of the politicians. Barney Frank is still using Freddie and Fannie for his owe social agenda.

All the banks are holding on to their " Toxic Assets" because they never needed our tax money to bail them out.

The are still giving out bad loans because the our government refuses to stop wasting the taxpayers money. The government asked Citi to cut the dividends that I use to live on in my retirement.

Jul 07 12:00 PM

[Mad Taxpayer:]

What to do? I say it is time for us to TAKE BACK DC via the next election. That may show the irresponsible idiots in DC that enough is enough!


On Jul 06 10:51 AM Pottermus wrote:

> Amen. I do have a question. If Bernie Madoff got 150 years, the man
> will be well over 200 when relesed, what should these bankers serve?
>
>
> Maybe rippimg off people, not economically or politically as the
> elite, is sort of OK.
>
> Well we had a Revalotionary War and Civil War to get things right.
> Neither seemed to have worked. Any ideas out there on what to do
> next?

Jul 07 02:11 PM

[Ricard:]

Interesting article. I agree that we live in Corporate America whether or not we choose to realize it.


"What is Citi doing with this extra cash flow? Increasing salaries for top executives by up to 50%, of course. "

If this comes with reasonable bonus packages, then I'll be all for it.
Management bonuses currently reward short term risk-taking while at times inadvertently sacrificing long-term viability, so the less of that the better. The biggest bonuses should be given to those who risk their own capital, the shareholder.


"True enough, except that this is a bank that is still issuing no-doc, no appraisal mortgages more than a year after the housing market began to crash. "

There will always be sub-prime, alt-A, and no docs. That's been true for decades, and it will continue to be true throughout and after this crisis ends. There's legitimate demand for these products, but they usually come at substantial costs to the borrower. Usually prime banks like Citi wouldn't dabble in this niche sector, so I can see how its insistence to do so can draw ire from commentators like yourself.

Jul 09 07:35 PM