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Will Citi Be the Next Big Bank to Go Under?

By Phil Mattera, Dirt Diggers Digest. Posted March 6, 2009.


Despite the efforts of the feds, the bank whose motto is "the Citi never sleeps" may soon be sleeping with the fishes.

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A couple of years ago, the mighty Citigroup traded at around $50 a share. Today, March 5, the price hovered around $1 and for a while was below a buck. In other words, one of the largest financial institutions in the world is in effect a penny stock. At one time, a descent to that level would have been enough to get a company delisted from the New York Stock Exchange, but standards have been relaxed.

Penny stocks have traditionally been associated with unscrupulous brokerage practices, such as the “pump and dump” scheme graphically illustrated during some episodes of The Sopranos (photo). A look back at the record of Citi during the past decade does not suggest a moral compass much different from the wise guys of Northern New Jersey. As U.S. PIRG Education Fund notes in its recent report Failed Bailout, Citi helped crooked companies such as Enron carry out deceptive transactions and itself set up scores of entities in offshore tax havens such as the Cayman Islands in order to avoid both taxes and oversight.

Citi’s actions had an impact beyond its own unjust enrichment. As Multinational Monitor editor Rob Weissman and his colleagues show in their new report Sold Out, Citigroup played a key role—thanks to $19 million in campaign contributions and $88 million in lobbying expenditures—in bringing about the demise of the Glass-Steagall Act and other deregulatory moves that paved the way for the current meltdown of the financial system.

Yet Citi’s management is, to a great extent, no longer in control of the company’s fate. Today it is the federal government that is in effect trying to pump up the bank and its stock. The Obama Administration, regrettably, is perpetuating the idea that Citi is too big to fail and thus requires a seemingly unlimited commitment of public resources.

Unfortunately for U.S. taxpayers, the pumping will not be followed by a timely dumping of the federal holdings in Citi at a fat profit. In fact, the federal capital infusions, loss-sharing agreements and loan guarantees are not stabilizing the company and pushing up its stock price. The more the feds put into the bank, the less the market seems to think it is worth. This downward move is attributed in significant part to short-selling of Citi’s common stock by hedge funds. At one time, those funds were apparently in cahoots with Citi. Last fall the Senate Permanent Subcommittee on Investigations charged that Citi was one of the banks that had helped offshore hedge funds engage in tax avoidance. I guess there really is no honor among thieves.

The U.S. government is now in the ridiculous position of having made commitments potentially costing hundreds of billions of dollars to a bank that the stock market, as of today, thinks is worth a total of only about $5 billion. As long as the Administration avoids the seemingly inevitable need to nationalize and reorganize Citi and the other large zombie banks, its strategy amounts to little more than “pump and slump.” Despite the efforts of the feds, the bank whose motto is “the Citi never sleeps” may soon be sleeping with the fishes.


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See more stories tagged with: banks, citi, fail, econopocalypse, feds

Phil Mattera is research director of Good Jobs First and head of its Corporate Research Project.

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View:
its time....
Posted by: grosspointblank1986 on Mar 8, 2009 4:11 AM   
Current rating: Not yet rated    [1 = poor; 5 = excellent]
its time to let these zombie banks fail. After a lay off in 2001 I tried to work out payment arrangements so my credit would not be damaged by my job loss. That was when I learned that these credit card companies don't care about you the customer. your nothing more than a cash cow for these credit card companies, and don't talk to me about credit counseling. Thats a scam by the credit card companies to avoid their responsibility to their customers.

So I say "LET THEM FAIL!!!"

Maybe then will get a better company the cares more about its customers then about its bottom line.

[« Reply to this comment] [Post a new comment »] [Rate this comment: 1 - 2 - 3 - 4 - 5]

International banks and robbers
Posted by: Mrs. Jefferson on Mar 8, 2009 3:07 PM   
Current rating: Not yet rated    [1 = poor; 5 = excellent]
Yes..we don't know what debt they have or where our money went. Bailout those British bankers, etc. Rob America so they can destroy our wealth and power and then make us a world order banking system (and government controlled by the Fascists). That's the plan Congress. At least Prime Minister Brown wants it to solve the financial crisis (which they created). Down we go with the British again but this time they get to rule us.

http://www.iht.com/articles/
2008/09/28/business/aig.php

London group started it. And yet no one in any scam goes to jail.

Berneke wants the "entitlements" discontinued to help pay off the debt. He never mentioned the war costs should be stopped (bring them home from around the world since we are not an Empire) and tax the few elite billionaires who could bring us more in the treasury. The IRS is trying to get money out of those off shore banks to help pay the taxes. They go after the Swiss. What about the British off shore banks in the Cayman Islands, etc.?

Here's the deal I'd give them Congress (IRS and FBI). Either you give us the names or numbers of those American accounts, corporations, and companies or we will set up an off-shore bank in Porto Rico which will hide British, Swiss, etc. money to evade taxes. Don't bother with the courts who can be paid off to protect the rich and mobs...drug money, etc.

Social Security and Medicare are not "entitlements" Secretary Berneke. We paid for them. It is ours not the Federal Reserve money. He acted like an expert in this regard but knew little about anything else. He has "his benefits and money" and acts very arrogant in his job. Fire him Congress...President Obama. He's a Neo Con who lies and keeps secrets with our money. Get rid of the Federal Reserve to preserve what we have left.

Clinton increased taxes to the rich and helped us pay off GH Bush war debt and S&L bailout. Under GH Bush the shift of wealth from the North to the South occurred. The Southern politicians ruined our country. Now because of the GW Bush war debt and international banking failures the wealth flows to the few top elite out of the country for world order government. Shift of wealth goes from us to the few world elite who don't care about anyone but their own money clip. It is betrayal by our leaders.

The wars are a profit center for the world bankers and elite. Now the citizens of this country should die on foreign soil for profiteers plus do without health care and SS? They are the problem? Government is for the running of our country not for the profit centers of the few elite in the world (or how they want to run it).

AIG=Holland Tulip Scandal. But the citizens of Holland didn't bail the "speculators" out. Nor should we.

[« Reply to this comment] [Post a new comment »] [Rate this comment: 1 - 2 - 3 - 4 - 5]

Sandy Weil smirks in your face
Posted by: weathered on Mar 9, 2009 6:49 AM   
Current rating: Not yet rated    [1 = poor; 5 = excellent]
and the business press will swear up and down he's a nice guy, just misunderstood.

[« Reply to this comment] [Post a new comment »] [Rate this comment: 1 - 2 - 3 - 4 - 5]

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