Citigroup: Rescued With Another $20 Billion Bailout

by LukeAmerica2020
The U.S. government has bailed out Citigroup Inc, once the nation’s largest financial institution, agreeing to guarantee most of the potential losses on $306 billion of high risk assets AND inject $20 billion of new capital from the Troubled Asset Relief Program (TARP) … in its biggest rescue of a bank yet. This comes after Citigroup received a $25 billion bailout just a few weeks ago (which it used for acquisitions rather than for mortgages or business loans!!!).

Citigroup’s rescue marks the latest government effort to contain a widening financial meltdown that has caused the disappearance or bankruptcies of companies including American International Group, Bear Stearns, Lehman Brothers, Washington Mutual, Fannie Mae, and Freddie Mac.

Citigroup has the farthest international reach of any U.S. bank, with operations in more than 100 countries. The bank was widely perceived to be too big to be allowed to fail, because any collapse could cause financial havoc around the globe.

According to the New York Times, the credit crisis appears to be entering another treacherous phase despite a $700 billion federal bailout, Citigroup’s woes are emblematic of the haphazard management and rush to riches that enveloped all of Wall Street. All across the banking business, easy profits and a booming housing market led many prominent financiers to overlook the dangers they courted.

While much of the damage inflicted on Citigroup and the broader economy was caused by errant, high-octane trading and lax oversight, critics say, blame also reaches into the highest levels at the bank. Earlier this year, the Federal Reserve took the bank to task for poor oversight and risk controls in a report it sent to Citigroup.

The bank’s downfall was years in the making and involved many in its hierarchy, particularly Mr. Prince and Robert E. Rubin, an influential director and senior adviser.

Citigroup insiders and analysts say that Mr. Prince and Mr. Rubin played pivotal roles in the bank’s current woes, by drafting and blessing a strategy that involved taking greater trading risks to expand its business and reap higher profits. Mr. Prince and Mr. Rubin both declined to comment for this article.

This video is from the LiberalBias100 YouTube channel.

 
Related References …

    CNNMoney.com

    CNBC.com

    FoxBusiness.com

 


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4 Responses to Citigroup: Rescued With Another $20 Billion Bailout

  1. patrick says:

    my initial thought upon hearing about Citibank’s potential bankrupcy was, Sweet… this will cancel out the small fortune’s worth of debt I have stored up on my trusty Citi-card, right?

  2. I believe the current economic crisis is due, in large part, to the greed of the mortgage and banking industries. The word “sub-prime” seems to have negative connotations in and of itself. The greedy mortgage industry suckered people into buying more house than they could realistically afford. And now we’re surprised the house of cards is collapsing.

    The ripple effect is people having trouble with house payments, the drying up of consumer credit, and a significant hit on a domestic auto industry that was working to fix itself. Lots of people want to bash the Big 3 for making big SUVs and pickup trucks, but that’s what consumers wanted up until 2008. Small cars have never been a profitable segment for the Big 3. GM and Ford both have credible small cars, with plenty available.

    So, Citigroup, which has already gotten a $25 billion grant from the taxpayers, suddenly needs more. Treasury Secretary Paulson is ready to give them another $20 billion, no questions asked. There’s no expectation for a payback of this money. So, why can’t the Big 3 get a $25 billion loan?

  3. CynicalSynapse, indeed, I concur that greed has veered us onto this recession highway. But, have any of the bailouts forestalled a financial disaster? We can only hope. Let us also hope that at the current velocity and heavy congestion of bailouts that we don’t careen into a full-blown depression.

    Frankly, you have an excellent point about the Citigroup comparison. If they qualify for ANOTHER $20 billion, surely the Big-3 should likewise qualify … particularly in light of the many downstream repercussions.

    However, one has to ask when they’ll request the next one. Will it be February or March? And, why aren’t BMW, Honda, Toyota, Porsche, Mercedes, and Subaru importuning in the bailout queue?

    IMHO, there are two reasons. First, their management teams have made more correct decisions. Second, the unions take far less from these companies. Estimates are that Big-3’s car prices include nearly $2000 in union expenses that these other manufacturers are not burdened with. Thus, Honda and Toyota can offer $2000 “more” features for the same price.

    Ergo, these issues must be addressed so that the Big-3 don’t come back in three months like swine to the slop trough.

    Finally, here’s my idea. Instead of an outright bailout or an enormous loan, why not offer a government funded rebate on new car purchases? Let the amount range from $1500 to $3000 based on the fuel-economy of the vehicle … then the government should reward the manufacturer with the full rebate amount upon sale of the vehicle.

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