The Citigroup Deal is Lousy for America

George Washington’s Blog
Tuesday, Nov 25, 2008

The verdict on the Citigroup bailout is pretty much unanimous: its a terrible deal for America.

Nobel economist Paul Krugman:

“A bailout was necessary — but this bailout is an outrage: a lousy deal for the taxpayers, no accountability for management, and just to make things perfect, quite possibly inadequate, so that Citi will be back for more. Amazing how much damage the lame ducks can do in the time remaining.”

Economist and former labor secretary Robert Reich:

“This is not a particularly good deal for American taxpayers, but it is a marvelous deal for Citi. In return for all the cash and guarantees they are giving away, taxpayers will get only $27 billion of preferred shares paying an 8 percent dividend. No other strings are attached. The senior executives of Citi, including those who have served at the highest levels in the US government, have done their jobs exceedingly well. The American public, including the media, have not the slightest clue what just happened.”

Economist Paul Kedrosky:

“So far I’m not impressed”

Financial advisor and analyst Yves Smith:

“Note key element of the deal is that the Federal government will guarantee $300 billion of Citi assets, a much bigger number than had been leaked earlier, with a rather convoluted loss-sharing arrangement, but the bottom line is that Citi is at risk for at most $40 billion. Citi also gets a $20 billion equity injection, on slightly more onerous terms than the initial TARP investments, but still more favorable than Warren Buffett’s investment in Goldman. Oh, and it appears there will be NO management changes.”

Washington Post financial writer James Kwak:

“The third goal should have been getting a good deal for the U.S. taxpayer, but instead Citi got the same generous terms as the original recapitalization. 8% is still less than the 10% Buffett got from Goldman; a cap on dividends is a nice touch but shouldn’t affect the value of equity any. By refusing to ask for convertible shares, the government achieved its goal of not diluting shareholders and limiting its influence over the bank. And an exercise price of $10.61 for the warrants? It is justified as the average closing price for the preceding 20 days, but basically that amounts to substituting what people really would like to believe the stock is worth for what it really is worth ($3.77).”

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5 Responses to “The Citigroup Deal is Lousy for America”

imanig Says:
November 25th, 2008 at 6:46 am
how many billions in christmas bonouses will citi hand out?the government never makes a profit-opens the door for corporate welfare paid by the tax payer for the infinite bailout scam
warlopo Says:
November 25th, 2008 at 9:23 am
what makes this more lowsey for americans, maybe this writer needs to wake up more, but this whole scam is Bullshit for american interest, and I I mean the people…
…
Joe in JT Says:
November 25th, 2008 at 11:00 am
When Paulson and Bush trotted down the steps of Capitol Hill to announce this next bailout disaster did you all notice the complete and utter arrogance of the “decider”? He said basically this bailout will go through whether you like it or not, and if we need to bailout some more so be it. Tough shit if you all don’t like it.

Then a reporter asked if President elect O’Bama was informed or part of the process the “decider” said , “He was informed”. Like he dropped him a stinkin email or form letter after all the decisions were made, as if O’Bama was just an after thought.

The banksters are now in high gear scrambling to clean out the cupboard of our Treasury and stick the resulting mess on taxpayers. That’s why they didn’t even bother to rig the elections this year for a Neocon. They’ve got their money and they are splitting.
Huh? Says:
November 25th, 2008 at 1:21 pm
The American government is completely IMPOTENT!
Where is the strength of character in leadership, and the actions to back it up?

I would steal billions of dollars too if I knew the only consequence would be some limp dicks frowning and shaking their heads in disapproval… try robbing a bank and see if thats the reaction you get when the cops arrive.

Maybe the next American revolution will occur as class action lawsuits on behalf of the taxpayers against these fraudsters. If government can’t act in the interests of the people, maybe the people need a different kind of representation.
Losers Says:
November 25th, 2008 at 10:23 pm
I guess this country either deserves this because nobody wants to act.
OR
May some people should get together in a group and gun down people like Paulson