Bailing Out Taxing Taxpayers
Wonk Room, Think Progress:
Last night, federal regulators “approved a radical plan to stabilize Citigroup in an arrangement in which the government could soak up billions of dollars in losses at the struggling bank.” The rescue package “shields the bank from losses on toxic assets and injects $20 billion of capital, bolstering [Citi’s] stock after its 60 percent plunge last week.”
Citigroup is a huge financial institution, with $2 trillion in assets tied up in over 100 countries. It really is the epitome of “too big to fail.” However, the bailout of Citigroup is symbolic of Treasury Secretary Henry Paulson’s continued flailing about with the $700 billion Troubled Assets Relief Program (TARP).
As the Wonk Room noted last week, Paulson’s declaration that the banking system “has been stabilized” was followed by Citigroup’s dive into the tank. Now, after assuring everyone that he didn’t need to use any more TARP funds to secure troubled assets, Paulson has done just that to save Citigroup. As Tyler Cowen at Marginal Revolution asks, “Didn’t Paulson tell us just a few days ago that TARP wasn’t needed after all? Doesn’t this mean that Paulson should speak less frequently?”
The emerging consensus from economists is that Citigroup received a sweetheart deal, which is not in the taxpayer’s interest. Nobel Prize winning economist Paul Krugman wrote that “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.” […]
As James Kwak as The Baseline Scenario notes, Paulson’s message amounts to “We will protect some (unnamed) large banks from failing, but we won’t tell you how and we’ll decide at the last minute. As long as that’s the message, investors will continue to worry about all U.S. banks.”
Indeed, Paulson is not inspiring any level of confidence, moving haphazardly from one proposal to the next, and focusing solely on salvaging the financial sector while doing nothing for the people whose money is financing the salvage effort.
Executive pay at Citigroup draws scrutiny amid rescue
Citigroup Inc's top executives could forego some of their compensation as a condition of the bank's bailout, but that may not satisfy critics who want firm limits on the earnings of leaders at companies getting government help.
Citigroup, the latest financial institution lining up for federal help to shore up its finances, must submit an executive pay plan for government approval as part of its rescue. The plan should focus on rewarding long-term performance and contain "appropriate limitations," the bailout agreement says. […]
Earlier rules announced by the U.S. Treasury Department aiming to curb payouts at various banks participating in a federal cash infusion apply to a company's chief executive, chief financial officer and the next three most highly compensated executive officers.
The prospect of big payouts to executives at banks getting federal aid amid the economic crisis has infuriated some politicians and shareholders who say these managers -- among the highest paid in corporate America -- helped create the financial crisis through risky business practices. […]
The public wants "strict limits on executive pay," said Sarah Anderson, a pay expert at the Institute for Policy Studies, which has pressed for executive pay curbs.
"We've been told for so long that these guys are such geniuses that we have to pay them this kind of money or these companies will collapse," she said. "Now these companies are collapsing and they are still telling us these guys are geniuses who need to make this amount of money."
Citigroup's Spending Indefensible and Unacceptable
Rep. Elijah Cummings:
After reading yesterday morning that Citigroup--which has already received $25 billion in bailout money--is adamant in maintaining its $400 million naming rights to the new New York Mets stadium, I was shocked to learn that the company came to the federal government asking for an additional multi-billion dollar lifeline. Surely, if the company has the funds to paste its name to a recreational facility, it has the money to maintain its operations and keep the 52,000 jobs it announced last week it would be eliminating.
While I understand that Citi is under a contractual obligation with the Mets, I cannot understand why the organization seems to be refusing at the very least to explore options out of that contract. This type of spending is indefensible and unacceptable to Citigroup's new partner and largest investor: the American taxpayer. My constituents in Maryland did not turn over their hard-earned wages to fund a baseball stadium in New York.
One would think that the Mets would be open to finding a new sponsor, as well. Why would any team want its new stadium, the symbol of a new era of victories, to be named after and symbolized by a company claiming to be on the brink of collapse?
General Motors, Tiger Woods end endorsement deal
General Motors Corp and popular professional golfer Tiger Woods said on Monday that they would end their endorsement deal at the end of the year.
GM, which has warned it will soon run short of cash and is asking the U.S. government for financial support amid the economic slowdown, and Woods, who is recovering from reconstructive knee surgery, called the arrangement "mutual and amicable." […]
GM has deals through 2010 as the title sponsor of two PGA Tour events: the Buick Invitational in La Jolla, California, and the Buick Open in Grand Blanc, Michigan.
Buick has been involved with golf since 1950, when it became one of the PGA Tour's initial sponsors, and it is still the tour's official car through 2010. […]
GM also is in talks with the PGA of America about its sponsorship contract, Ternes said.
President-Elect Obama Unveils His Economic Team
Full prepared remarks and video at Crooks and Liars:
With the economy in tatters, President-Elect Obama held a news conference this afternoon to announce the nomination of four members of his core economic team.In other economic news, Citigroup just received a much-needed transfusion from the government:
Tim Geithner - Secretary of the Treasury
Larry Summers - Director of the National Economic Council
Christine Romer - Chair of the Council of Economic Advisors
Melody Barnes- Director of the Domestic Policy Council
"Again, this won't be easy. There are no shortcuts or quick fixes to this crisis, which has been many years in the making - and the economy is likely to get worse before it gets better. Full recovery won't happen immediately. And to make the investments we need, we'll have to scour our federal budget, line-by-line, and make meaningful cuts and sacrifices as well - something I'll be discussing further tomorrow."
Wall Street showed clear relief Monday over the government's plan to bail out Citigroup Inc. — a move it hopes will help quiet some of the uncertainty hounding the financial sector and the overall economy. The major indexes jumped more than 2 percent, extending Friday's big rally.
In case there was any doubt about how serious this crisis is, President Obama plans on signing an economic stimulus package into law on the very first day he takes over.