Bailouts: The Ultimate Double Standard

[Joanne98]

The auto industry is being put through the wringer for relatively modest public aid, while the Treasury has taken a hands-off approach to the much larger bailout of the financial industry.

Robert Kuttner | December 15, 2008

Imagine if the automakers had been offered the same kind of government assistance as the banks. Detroit's Big Three would each get new government capital totaling many tens of billions to replace their lost equity, as well as government guarantees running into the hundreds of billions. And government, oddly, would ask almost nothing in return. There would be no "car czar" to supervise Detroit's management, no wage and benefit cuts for employees, no review of product lines, and no government-mandated restructuring plan. A pretty sweet deal.

But that's basically what the banks got. You might think that the banks had some friends in high places -- friends like Treasury Secretary Hank Paulson, former CEO of Goldman Sachs where Robert Rubin once was co-chairman; or Tim Geithner, president of the New York Federal Reserve Bank and treasury-secretary designate, a protégé of the same Robert Rubin who now is a senior executive of Citigroup.

The contrast between the proposed auto bailout and the bank bailout gives new meaning to the term "double standard." And the case of Citigroup is a very instructive place to begin.

Citigroup, once a trillion dollar behemoth, is one of America's largest three banks (the other two are JP Morgan Chase and Bank of America), and by any normal measure Citigroup is insolvent. Without the extraordinary infusions of government funds that Citigroup has received, it would be out of business.

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