Dean Baker: Why Doesn't the Government Own Citigroup Outright?

[flpoljunkie]

Why Doesn't the Government Own Citigroup Outright?

The coverage of the negotiations over switching the government's preferred shares in Citigroup to common shares has been awful. It treats this issue as a purely technical question. It isn't. It is a question about handing taxpayer dollars to Citigroup's shareholders and top executives.

The government originally lent $25 billion to Citigroup at below market interest rates in the first wave of TARP lending. In December, it lent another $20 billion and guaranteed $300 billion in bad assets. (The guarantee was almost certainly worth more than $30 billion annually, given the quality of the assets.) On that day, $20 billion would have been sufficient to buy Citi in its entirety on the stock market.

So the question is, how can the taxpayers own anything less than 100 percent of Citi, if its preferred shares (the form of the loans) are converted to common shares? Why is this anything other than a huge gift to Citi's shareholders and top executives?

I was just at a White House conference listening to a lot of people talking about cutting Social Security and Medicare benefits for retirees. How can the same government that hands tens of billions of dollars to Citi's shareholders and top executives cut key benefits for the retirees? Why aren't the news reports calling attention to this massive give away to some of the nation's richest people?

--Dean Baker

Posted by Dean Baker on February 24, 2009 5:42 AM

http://www.prospect.org/csnc/blogs/beat_the_press_archive?month=02&year=2009&base_name=why_doesnt_the_government_own

[flpoljunkie]

1. 'It's a question about handing taxpayers dollars to Citigroup's shareholders and executives.'

And, a very troubling question, which is being ignored by the media.

[wiggs]

2. The theory is that the (unadvertised) debt on the books is so high that

taking over citibank exposes ownership as a really bad move. Second reason is that the idea of nationalization of banks, a step toward socialism, takes a little longer to adjust to politically.

[gauguin57]

3. Hey! I wanna own them! Cuz they're my credit card company, and I've wanted to give them

a piece of my mind from time to time. If I'm their boss, I can write them all sorts of nasty letters, and they have to listen to me or I'll fire them.

[AtomicKitten]

4. Or as Bill Maher calls them, ShittiGroup. n/t