Imperium Watch: Banking on the Quick Buck

[AlphaCentauri]

Citibank, part of the largest bank holding company in the U.S., is now propped up by an infusion of cash from Abu Dhabi, Singapore and Saudi Arabia because of $24 billion in losses stemming from the subprime lending disaster and other credit problems.

In the world of photo ops that news has become, Citibank appears among a gaggle of institutions that lost money because of the subprime mess, and it's easy to chalk the bank's troubles up to a failed experiment with packaged securities that amounts to a learning experience. But the subprime fiasco isn't just the scandal of the day. The problems of Citibank and some other large lenders have roots that go a long way back.

Citibank hasn't exactly been the poster bank for what the Victorians called probity for a long time. In the late 1990s, in a Congressional investigation of private banking and money laundering, Sen. Carl Levin blasted Citibank for coddling clients like Raul Salinas, brother of Mexican president Carlos Salinas, for whom the bank transferred $80 million from Mexico to Switzerland, with some going to dummy companies in the Cayman Islands. Another Citibank client was Sani Abacha, the Nigerian leader believed to have looted $2 billion to $4 billion from his country's public coffers, who was allowed to use $39 million from a certificate of deposit with no penalty to help his sons go into hiding when he became the target of corruption allegations in Nigeria.

Would a bank with a track record like that go for easy money with subprime loans wrapped in with other debt in so-called CDOs (collateralized debt obligations)? Well, why not? In the late 1990s, Sen. John Kerry warned us about the global interdependence and accompanying corruption of the world's large banks in his book The New War.

As to the kind of oversight the banks can expect from Washington, here's what Treasury Secretary Henry Paulson said last fall, when the storm was gathering: "Innovation often outpaces regulation. That is not surprising, and we would not want it the other way around." So what would we want? Regulations that are forever playing catchup while millions of consumers go under with each new scam?

http://www.valleyadvocate.com/article.cfm?aid=6183

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