Wall Street's 10 Greatest Lies of 2009
Continued from previous page
Once the nation’s largest bank, later its largest bailout recipient, the firm exited its TARP obligation on December 14 with CEO Vikram Pandit stating, "Once Citi repays the $20 billion of TARP trust-preferred securities and upon termination of the loss-sharing agreement, it will no longer be deemed to be a beneficiary of ‘exceptional financial assistance’ under TARP beginning in 2010." (Read: I don’t want to hear about compensation caps anymore!)
He went on to say that, "By any measure of financial strength, Citi is among the strongest banks in the industry, and we are in a position to support the economic recovery."
Shareholders didn’t feel the same way. Citigroup shares already trading well below those of its main competitors have fallen 13.5 percent since that announcement. One of their key clients, the Abu Dhabi Investment Authority, accused the firm of misleading them over a $7.5 billion investment. Plus, in order to come up with the money to pay back the government, they had to raise it in the markets, thus diluting their stock – all to keep their petulant star employees happy at bonus time.
The Citigroup story should be examined for the other big banks. They may talk tough about paying back the government, but underneath they are hurting. And their pain will become our cost again – because nothing fundamental has changed this year, and that means – floating on our public money, these banks are actually still ticking time bombs.
Bonus Lie: Goldman Sachs is sorry.
On November 17, Lloyd C. Blankfein said he was sorry about his firm’s role in the financial crisis. "We participated in things that were clearly wrong and have reason to regret, we apologize." He didn’t say he was sorry the firm is still floated on $43 billion of total subsidies including FDIC guarantees for debt it raised, that were logically supposed to aid consumer oriented banks, and the $12.9 billion it got through the AIG bailout.
Yet the firm has the highest percentage of trading revenue of all the banks that got assistance; in other words, the revenue most linked to risk-taking, at 79 percent, or $38 billion out of $47 billion for annualized 2009. This is up from 41 percent, or $9 billion in 2008, and 68 percent in 2007 and 2006. And as noted before, Goldman leads the bonus sweepstakes for 2009. The firm is probably not very sorry about all of that.
Maybe I’m being too hard on everyone. Maybe all those toxic assets we all forgot about have value now. Maybe bank profits are based on something real. Maybe the increasing reserves against increasing credit losses aren’t happening. Maybe those foreclosures aren’t really happening. Maybe banks aren’t sitting on homes because they don’t want to dump them into the market and ruin the fantasy that prices have hit bottom. Maybe eight million jobs are waiting on the other side of 2010. Maybe I should just send a holiday card to Goldman saying thanks for everything. I’m sorry I ever quit. Maybe Lloyd Blankfein really is God.
Or maybe, the next mammoth pillage will be the one that makes a difference. But I truly don’t want us to have to find out. May 2010 be the start of a more insightful decade.