Did the Citibank Bailout Screw the American Taxpayer?

Posted by Jane Hamsher, Firedoglake at 7:25 AM on November 25, 2008.

Google Chairman and CEO Eric Schmidt, who is a member of the Obama transition economic advisory board, appeared on Rachel Maddow.  Of the Citibank bailout, he said:

SCHMIDT:   When I looked at the structure of the Citibank deal, it looks roughly correct.  And I know that both President Bush and President Elect Obama and their teams worked on getting it right.  It's got the right set of incentives, the right ownerships and the right guarantees.

Really?

Krugman:

Mark Thoma has the rundown of informed reactions. 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.

Yesterday Maria Bartiromo had a truly bizarre interview on CNBC with Prince Alwaleed bin Talal Ibn Saud, who increased his stake of Citigroup from 4 to 5 percent last week.  As camels wandered around in the background, Prince Alwaleed reiterated his support for current Citigroup CEO, Vikram Pandit.  Now, if you told me that our Saudi bankers demanded that we had to do something about Citi, I might believe you.  But the idea that the deal is "correct" is bizarre.

Schmitt goes on to regard the auto industry as some outfit from the 80s that probably need to be purged from his closet. He wants "a plan that ultimately gets them to a profitable growing state with the right product," but nobody asked that of Citi as far as I can tell -- the "plan" there was just to unload all of Bob Rubin's worthless "creative financial instruments" on the taxpayers.

SCHMITT:  To me the question is how do you create a new economy, one with a lot of jobs and a lot of innovation. And that is not going to occur in these large traditional industries.  It's going to occur in small companies with new regulations that allow them to enter markets.  One of the discussions that's underway is that there's going to be a huge stimulus package, is make sure that that money also goes to for example green technology and green energy.

Rachel looks appropriately confused, and asks him whether he envisions a manufacturing base in this new economy:

SCHMITT:  We absolutely have a manufacturing base, and that manufacturing base is a lot of new products that have yet to be invented here.  The fact of the matter is that when you're manufacturing new things it's better to have them next door so you can change them very quickly and so forth and so on.  You're using the term "old industry" but the real growth is going to come from new industries and small businesses, which is where all the jobs in America are created anyway.  So we're always focused on these big companies, but in fact the action should be elsewhere.

How about cars?  Do we drive cars in this glorious future with products nobody knows about yet?  

Once again, he boxes Detroit in with the expectation that they can come up with a plan that will make them profitable and create lots of green cars.  Ed Rendell repeats it later in the program -- Detroit's plan should include plans to build a hundred thousand electric cars.

Is there any reason to believe there is demand for a hundred thousand electric cars?

What model?  At what price?  Who is going to buy them? When are they supposed to be produced, and where?

I like the idea, don't get me wrong, but if that's what we want, we have to acknowledge that it's going to be a public works program and stop demanding that Detroit make a profit.  Unless the government is going to come in and create demand by subsidizing sales or raising gas prices, it's unrealistic to expect both.

I'm listening to interviews like this and wondering where the people are on Obama's economic team who have any sense of what workers and blue collar people are experiencing in this economy right now.    Now that we've bailed out the people responsible for this mess, shouldn't we start thinking of those who had no hand in its creation, but are hit the worst?  Because this real cool future where we make only iPods or something, only better, doesn't seem to include them.

Tagged as: obama, citigroup, maddow, krugman, schmitt

Jane Hamsher is the founder of FireDogLake. Her work has also appeared on the Huffington Post, Alternet and The American Prospect.