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PRESIDENT BARACK HUSSEIN OBAMA Citigroup Bailout for $38.6 BillionA 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. "If Citigroup had not been bailed out, then the whole financial system could collapse," said Princeton economics professor Paul Krugman on CBS' The Early Show. But is the government bailout of Citigroup well-structured, and are taxpayers getting a fair deal here?Krugman, author of "The Return of Depression Economics and the Crisis of 2008" (Norton), says on first read, no. "Most of the people who have looked at it, the small hours of this morning, have said this is a lot of taxpayer risk in return for not much," Krugman told co-anchor Maggie Rodriguez. "It looks like a very sweet deal for Citigroup management, very sweet deal for Citigroup shareholders, to the extent they have anything left - not very good for the taxpayer. This was not good." With other bailouts seemingly having done nothing to boost consumer confidence, Rodriguez asked, why do it if it is not well-structured? "Well, you know, things could be worse, you know? That's been the moral of this crisis: things can always be worse,' Krugman said, "and they have been getting worse. "Things could be much worse than they are. It's what hasn't happened, not what has, is the justification. We had to do this, but we should have done it better." (Source: Huffington Post.) OPINION: Citigroup deftly showed other big companies how to play bailout bingo earlier this week. They got theirs in record time even though most of the nation didn't know they were in trouble until a few minutes before the check was written. By the way, lost in the back pages of the Citi story is an interesting sidebar about former Citi director and senior advisor Robert Rubin.(SITE NOTE: Just days after procuring a $326 billion bailout and $20 billion capital injection from the federal government, just a week after divulging its intention to lay off 52,000 workers, Citigroup is publicly confirming and remaining steadfast in its plan to pay $400 million for naming rights to the New York Mets' new baseball stadium as "Citi Field". If a corporation is in that much trouble, shouldn't the frills go before the bailout? (Source: Reuters.) Citigroup Should Be Held Accountable, Obama Aide Podesta Says (Nov 2008) The U.S. government should demand accountability and changes at Citigroup Inc., as well as from automakers, in exchange for any financial assistance, a top transition official for President-elect Barack Obama said. "It seems to me that the government ought to demand accountability," including on executive compensation, John Podesta said in an interview on Bloomberg Television's "Political Capital with Al Hunt," scheduled to air today. "If we're going to have one rule, we ought to apply it to all of the financial institutions that we're taking a look at," Podesta said. "That's my personal opinion." In the case of Detroit, lawmakers are demanding from auto industry executives a concrete plan on going forward while others are asking for management changes. The government hasn't made those demands of Citigroup. Podesta's comments about seeking reforms from Citigroup echoed those made this week by Senate Banking Committee Chairman Christopher Dodd, who said Washington should have struck a better deal in its rescue of Citigroup, including management changes and a greater return for taxpayers. The Federal Reserve, Treasury Department and the Federal Deposit Insurance Corp. on Nov. 23 announced a plan to insure Citigroup against losses on $306 billion of troubled assets and inject $20 billion of capital after the company's shares plunged more than 60 percent in a week. As part of the plan, Citigroup is required to submit an executive-compensation plan for government approval. (Source: Bloomberg.) January 2009UPDATE: Jan 2009: Citigroup buys $50 million Corporate jet with Bailout funds After accepting billions of taxpayer dollars back in the latter months of last year, Citibank refused to abandon plans to spend $400 million to acquire naming rights to the New York Mets' new ballpark, and just recently reportedly paid $50 million for a new corporate jet. Is this the kind of behavior, the same behavior seen by executives at Merrill Lynch (who spent millions renovating office space) and at AIG (who went on expensive corporate retreats) which you had in mind when voting against this disastrous piece of legislation?February 2009UPDATE: Feb 2009: After receiving bailout, former CEOs still getting Perks Banks that took government rescue funds have been criticized by President Barack Obama, Congress and the public for lavish spending on pay and perks for top executives. Lenders continue to dole out benefits, including the longstanding practice of free offices and secretarial help, to former chiefs. Some of the recipients are blamed for abetting the financial crisis. (Source: Bloomberg.)`US Gov`t Considers Buying Stakes in Citigroup` (Feb 2009) The U.S. government is considering taking a stake of 25-40 percent in Citigroup, the Wall Street Journal said on 23 Feb. A Citibank source said the discussions could fall apart but that Washington could own as much as 40 percent of Citigroup's common stock. Bank executives said they hope the stake will be closer to 25 percent. The daily said the government is negotiating with the bank to convert Citigroup's preferred shares bought by the government twice since October last year into common stocks. In other words, Washington, which injected 45 billion U.S. dollars (67 trillion won) equivalent to 7.8 percent of the group's preferred shares, wants to convert the shares into common stock. Washington would hold 25-40 percent of Citigroup's common stock depending on stock price. Details of the negotiations including state intervention have yet to be released. As rumors last week said the government will nationalize Citigroup and Bank of America, their share prices collapsed. The Wall Street Journal also said the White House has dismissed speculation that the government is preparing to nationalize several large U.S. banks. Bank of America also said it had not negotiated with the government. The New York Times also said on 23 Feb that the government and Citigroup will negotiate over bigger ownership, adding the government will take a hard look at the financial condition of the 20 largest U.S. banks. Under the plan, the U.S. government will use computer-run "what-if" situations to estimate what would happen to each bank under Depression-like conditions. The New York Times said Washington is highly likely to conclude that large U.S. banks need additional public funds and accordingly own bigger stakes in them. (Source: Donga Ilbo.) Government Makes 3rd Rescue Attempt For Citigroup (Mar 2009) The U.S. government will exchange up to $25 billion in emergency bailout money it provided Citigroup Inc. for as much as a 36 percent equity stake in the struggling bank, greatly increasing the risks to taxpayers as voter unhappiness about the broader bailout program rises. http://cbs2.com/national/citigroup.government.deal.2.945596.html The $25 Billion was originally secured by "Preferred Shares" of Citi Group Stock. These "Preferred Shares" paid the US Taxpayers 8% interest and were "first in line" to be repaid should Citi Group eventually end up in receivership. The "Preferred" shares provided the best security possible for American Taxpayers. "Taxpayers will also lose roughly $2 billion in dividends, because the preferred shares they are giving up paid 8% dividends. Citi suspended its common stock dividend as part of the agreement." (CNN Money.) Common shares absorb losses before preferred shares do, which means taxpayers would be on the hook if banks keep writing down billions of dollars' worth of rotten assets, such as dodgy mortgages, as many analysts expect they will." (CBS2.) The Obama Administration decided to employ an "accounting trick" on Friday in the hopes of improving the "look" of the Citi Bank balance sheet without making any meaningful change. Once again we get get style over substance. No additional funds were provided, the $25 Billion was simply moved from the "Preferred" to the "Common Stock" column on the balance sheet. "The swap of $25 billion of preferred shares into common stock will expose the government to the same risks facing other holders of the bank's common stock". (CBS2.) In exchange for the "security" Taxpayers enjoyed from owning "Preferred" shares, the Government obtained working control of Citi Group by obtaining a 40% stake in the company's Common or voting stock. These Common Shares will be held in a "trust" in the Treasury Department where between 1 and 3 individuals will be politically appointed to, in essense, make secret decisions behind closed doors that will direct what activities the CEO and Board of Directors of Citi Group take. That is right, they will direct what types of loans are made and to whom. Isn't that how we got in this mess in the first place? In making this move the Government agreed to pay $3.25 per share for the Common Stock it obtained. That is right, the Government agreed to pay $3.25 a share for stock that sold for $2.46 a share the night before. The Government agreed to pay a 33% "mark-up" on the true value of the stock as of the start of business on Firday morning, 02/27/09. I'm outraged, the Government "threw away" 33% of the taxpayers $25 Billion (or $8.25 Billion) with the blink or wink of an eye. " Citi will offer to exchange up to $27.5 billion of preferred stock at a conversion price of $3.25 per share. That's a 32 percent premium over Thursday's closing price of $2.46." (CBS2.) "The new deal Friday did not give the bank any additional taxpayer dollars. But the government is taking on a greater risk by assuming more volatile common shares. The market price is well below the $3.25 per-share conversion price the government is paying." (CNN Money.) What does this mean? The Government paid $25 Billion for stock worth $16 Billion at the start of the day Friday. What is a $9 Billion Dollar loss anyway? Its only taxpayer money! "The administration decided to restructure the bailout package for Citigroup again in the hopes that converting $25 billion of preferred shares into common stock would give investors more confidence that the bank has sufficient capital reserves to withstand mounting losses on its holdings of mortgages". (Yes, that is right, the "Sub-prime mortgage crisis" caused the "banking crisis" which in turn brought down the US and World economy). (CBS2.) "Investors appeared disappointed in the deal and expected dilution of their stake, sending shares plummeting 81 cents, or 32.9 percent, to $1.65 in midday trading". (CBS2.) Was that it? Stockholders were disappointment that the value of their stock was diluted or were shareholders concerned that the Government had taken over "voting control" of Citi and that policticians, exercising voting control through a "stock trust" will secretly direct all of the activities of the Citi Group from behind closed doors in Washington? Earlier this year (January 2009) Richard Parson's, an Economic Advisor to Obama, was named Chairman of the Board of Citi Group. (CBS News.) Obama's plan was for the "accounting trick" or "stock switch" to increase Citi's "tanigible common equity" while the Politicians took over voting control of Citi. To many, when a Government takes over voting control of a Bank and suspends Common Stock dividends of that Bank, that Government has Nationalized that bank. "For Citigroup, the conversion is important because it increases the bank's tangible common equity, making an improvement in the bank's troubled balance sheet." (CNN Money.) By the close of the business day on Friday (02/27/09) Citi Common Stock was trading for $1.50 per share, a drop of nearly 40% off the stock price of $2.46 at the start of business on Friday. (A 40% drop from the actual trading price at the start of the day $2.46 share, not the "artificially" high price the Government paid of $3.25/share). (CNBC.) Obama's "trick" to improve Citi's "tangible common equity" failed miserably - Citi's net "tangible common equity" droppped 40% on Friday. The US Taxpayers $25 Billion in "Preferred Stock" was worth $11.5 Billion in "Common Stock" at the end of the day. In addition the Taxpayers lost $2 Billion a year in Dividends that the "preferred stock" was paying. A $13.5 Billion Dollar loss in one day …. What the heck, it is only taxpayer money anyway ….. and now the Government can run Citi behind closed doors. I'm sure the Administration thinks this move would have been cheap at twice the price - heck its the taxpayers who are on the hook and the Administration can just ignore them. Am I really to believe that this group has even a remote chance to turn this economy around and cut these huge deficits? Why am I to believe that? I'm anxiously awaiting the specifics of the "bank stress test" and the details of the "homeowner mortgage bailout" plan. (Source: McAuley's World.) March 2009Citi Says "Keep Your Money;" DJIA Up 239 Points (Mar 2009) When the market is down 45% and seems to have no bottom, what's a good way to instill some investor confidence? How about showing faith in the free market by NOT giving Billion$$ to corporate concerns? Today that happened, quite by accident, and the market loved it. It sure wasn't because the government acted at all like responsible adults. Comrade Obama and his lapdogs Reid and Pelosi are more than happy to use taxpayer moneys to buy influence in corporate America. The problem is that corporate America knows these irresponsible thugs would be awful business partners, and they are becoming more and more wary of the "help" that the government is offering. So today Citi sent a message that they want no more of what Comrade Obama is offering... and the market enjoyed one of the best days since our November Revolution. Let's hope corporate America wakes up before it's too late. (Source: Evil ConservativeWASHINGTON (Reuters) - Citigroup Inc Chairman Richard Parsons said on Thursday that the bank does not need any more capital injections from the government and expressed confidence that Citi would remain in private hands. Asked in an interview with Reuters whether Citigroup needed additional government capital injections, Parsons said: "No, I think actually, particularly with the latest conversion... Citi is actually one of the better capitalized banks in the world." May 2009Prudential, Ameriprise turn down TARP (May 2009) Prudential Financial Inc. will join Ameriprise Financial as insurers rejecting help from the U.S. Troubled Asset Relief Program, industry sources say. The two are among six insurers approved for billions in aid from the Treasury Department, but have opted to turn down the assistance, citing improved private lending conditions and a better climate to sell stock to raise capital, The Wall Street Journal reported Saturday.The newspaper quoted unnamed sources familiar with the matter saying Prudential would follow Ameriprise's lead and turn down TARP funds after the insurance industry waited months for the Treasury Department to decide whether they'd be eligible for the funds, which were approved last year to help bail out banks overwhelmed by the financial crisis. You don't take TARP money unless there's some weaknesses. It's not the happiest money in the world, Andrew Kligerman, an insurance industry analyst at UBS, told the Journal. Principal, along with fellow insurance industry giant Allstate, recently raised $1 billion, with Principal doing so from a common-stock offering and Allstate through a debt offering. Those two insurers were non-committal on whether they would accept TARP funds, the Journal noted. (Source: Red Orbit.) July 2009U.S. becomes Citigroup's biggest shareholder (Jul 2009) One hundred ninety-seven years, one month and 14 days after its founding, Citigroup Inc has given a roughly 34 percent stake to U.S. taxpayers. While a few technical details still remain, the bank has completed a months-long effort to convert preferred shares held by the U.S. government into common stock. Citigroup on Thursday completed two exchange offers to bolster the capital position of the nation's third-biggest bank, widely considered the most troubled large U.S. lender.Public investors, private investors and the government swapped close to $58 billion of preferred securities into common stock of the New York-based bank. Citigroup has said the swaps would leave it with more than 21 billion shares, up from 5.51 billion at the end of June. The $25 billion swapped by the government is part of its $45 billion infusion from the federal bank bailout plan, the Troubled Asset Relief Program. Another $20 billion of that sum will remain in the form of preferred shares, throwing off an 8 percent annual dividend. The higher government stake could add to pressure on Chief Executive Vikram Pandit to improve performance and shed unwanted or toxic assets. Citigroup has also overhauled upper management and added seven new directors this year. Earlier Thursday, Citigroup said it will sell a 64 percent stake in Japan's Nikko Asset Management Co to Sumitomo Trust & Banking Co for 75.6 billion yen ($790 million). Speaking in Kuala Lumpur, Malaysia, Pandit said the bank is moving "extremely fast" on asset sales. Citigroup agreed to the exchange offers in February as part of a government bailout, following $37.5 billion of losses over the previous five quarters.The swaps were originally expected to total $52.5 billion. They grew to $58 billion after regulators ordered Citigroup to build a buffer following a "stress test" of its finances. Citigroup said the swaps will make it one of the world's best-capitalized banks, with about $100 billion of tangible common equity. Other large Citigroup investors include several sovereign wealth funds, and Saudi Prince Alwaleed bin Talal. (SITE NOTE: Isn't it interesting that Saudi Prince may have used his wealth to benefit Obama's entry into Harvard -- though not substantiated.) The bank's roots date to when City Bank of New York opened on June 16, 1812, with $2 million of authorized capital. Citigroup itself was created on October 8, 1998 through the merger of Travelers Group Inc and Citicorp. Shares of Citigroup fell 4 cents to $3.18 in afternoon trading on the New York Stock Exchange.($1 = 95.7 Japanese yen) (Source: Reuters.) August 2009Major Democratic Fund Raiser Charged with Fraud of Citigroup (Aug 2009) A major fund-raiser for Barack Obama, Hillary Clinton and other Democrats was charged by federal prosecutors in New York in connection with a scheme to defraud Citigroup Inc (C.N). Hassan Nemazee, 59, was accused of one count of bank fraud for allegedly seeking a fraudulent $74 million loan from Citigroup's banking unit, U.S. Attorney Preet Bharara and the Federal Bureau of Investigation said on Tuesday.Nemazee will be released Wednesday on $25 million bond and be confined to his apartment on Park Avenue in Manhattan, with no access to computers. The bond is secured by the apartment and another home in Katonah, New York. Marc Mukasey, a former federal prosecutor who represents Nemazee, at a hearing called the bail "draconian," saying "it's the most onerous bail package I've ever been a part of." His client did not enter a plea. Nemazee faces up to 30 years in prison and a fine that could reach $1 million or more. He is chairman and chief executive of Nemazee Capital Corp, a private equity firm. The U.S. attorney's office declined to elaborate on the charges. Another hearing was set for Sept. 24. Prosecutors said Nemazee tried to get Citigroup's banking unit to lend up to $74 million based on fraudulent and forged documents suggesting that he had hundreds of millions of dollars of accounts available as collateral. They said Nemazee provided Citigroup with fake references so that when the bank would try to confirm details about his accounts, it would actually be contacting him. The scheme lasted from December 2006 to this month, prosecutors said. Federal agents stopped him on Sunday at Newark Liberty International Airport as he prepared to board a flight to Rome, and he repaid a loan of more than $74 million to Citigroup the following day, the government said. Nemazee was a national finance chair of Hillary Clinton's 2008 presidential campaign, and a supporter of Sen. John Kerry's run for the White House in 2004. He typically donates more than $100,000 annually to Democratic political candidates, including Senate Majority Leader Harry Reid and Sen. Charles Schumer, and sits on the board of the Iranian American Political Action Committee. Bill Clinton, when he was president, had nominated Nemazee to be U.S. ambassador to Argentina. Hillary Clinton is U.S. Secretary of State. Nemazee is listed as having been among the top "bundlers" of contributions to Obama's presidential campaign, according to OpenSecrets.org, a website maintained by a nonpartisan research group, the Center for Responsive Politics. According to Nemazee Capital's website, the firm was founded in 1987 and specializes in financial services. It said its acquisitions have included Carret Asset Management, a privately held firm founded by legendary investor Philip Carret, and part of what is now Brean Murray Carret & Co, a small investment bank. Brean did not immediately return a request for a comment. Citigroup spokeswoman Shannon Bell said the bank is working with authorities on the matter. The case is: U.S. v. Nemazee, U.S. District Court, Southern District of New York (Manhattan), No. 09-mj-1927. (Source: Reuters)
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