Citi Bites The Hands That Feed It

People on Fox News Channel and other conservative outlets charge that the government is taking control of private business.  Those saying this should know better.  The reality is quite the opposite: private businesses, and specifically a few large banks, have taken control of the government.

Worse, the bankers are using their control of the political system to line their own pockets while extracting cash from the very people who recently saved their bacon.  The looting that is now underway makes New Orleans after Katrina pale in comparison.  Consider Citigroup, ticker symbol C.  Citi is, you will recall, a bank that continues to exist only because both Bush and Obama administrations granted it billions in emergency financing on laughably favorable terms.

We, the American taxpayers, now own approximately one-third of Citigroup.  Call it socialism if you wish, but logic suggests that as owners we might get a break from those who owe their continued income to our generosity.  No such luck.  In fact, if you have a Citi credit card, the bank is spitting in your face by raising your interest rate.

What is Citi doing with this extra cash flow?  Increasing salaries for top executives by up to 50%, of course.  Never mind that these same people would be earning salaries of ZERO if the rest of us had not bailed their firm out of its insanely stupid risks.

Wait, you may say.  These are talented people.  They deserve to be well-paid, and the bank has to protect itself from credit risk.  True enough, except that this is a bank that is still issuing no-doc, no appraisal mortgages more than a year after the housing market began to crash.  Why should such monumental incompetence be rewarded?

Meanwhile, those not lucky enough to be employed by Citigroup are facing stagnant wages, if they are making any wages at all.  The official unemployment rate is now 9.5%, and more than 16% by some measures.  The average work week stands at 33 hours, the lowest since 1964, as employers try to avoid layoffs by reducing overtime and imposing furloughs.  All the while, Citigroup execs have been transferring money from your pocket to theirs.  The IRS, Treasury, and Federal Reserve merely serve as intermediaries.

So the question remains: who is controlling who?  The idea that the federal government is somehow oppressing banks like Citi is insane.  You, the taxpayers, are the ones being oppressed here.  The fact that the top executives and directors of Citi still have their jobs after all that has happened tells you everything you need to know.

The reality is this: heads the bankers win, tails the taxpayers lose.  It’s been going on for a long, long time and is not going to stop anytime soon.  Happy Fourth of July.

Disclosure: no position