Robert Reich: Why CitiGroup is About to Be Bailed Out and Not General Motors

[Bozita]

It's Reich's blog and it's worth the trip.

http://robertreich.blogspot.com/2008/11/why-citigroup-is-about-to-be-bailed-out.html

FRIDAY, NOVEMBER 21, 2008
Why CitiGroup is About to Be Bailed Out and Not General Motors

Citigroup was once the biggest U.S. bank. General Motors was once the biggest automaker in the world. Now, both are on the brink. Yet Citigroup is likely to be rescued within days. General Motors may not be rescued at all.

-snip-

In other words, Citigroup is not much different from General Motors. It's a company that once made lots of money but, through a series of management blunders, is now losing money hand over fist. Just like the shareholders and creditors of GM, Citi's shareholders and creditors are taking a beating.

So why save Citi and not GM? It's not clear. In fact, there may be more reason to do the reverse. GM has a far greater impact on jobs and communities. Add parts suppliers and their employees, and the number of middle-class and blue-collar jobs dependent on GM is many multiples that of Citi. And the potential social costs of GM's demise, or even major shrinkage, is much larger than Citi's -- including everything from unemployment insurance to lost tax revenues to families suddenly without health insurance to entire communities whose infrastructure and housing may become nearly worthless. I'm not arguing that GM should be bailed out; as I've noted elsewhere, GM's creditors, shareholders, executives, and workers should have to make substantial sacrifices before taxpayers should be expected to sacrifice as well.

Nonetheless, Citi is about to be bailed out while GM is allowed to languish. That's because Wall Street's self-serving view of the unique role of financial institutions is mirrored in the two agencies that run the American economy -- the Treasury and the Fed. Their job, as they see it, is to keep the financial economy "sound," by which they mean keeping Wall Street's own investors and creditors happy.

-snip-

more...

[lpbk2713]

1. There are no unions to bust at CitiBank.

It's that simple.

[MadMaddie]

10. Ding..Ding..Ding

It's so obvious that Paulson only cares about his cronies and helping to bust Unions.

It's so transparent.

Obama and his team can only sit back and watch the devastation that Paulson brings on America with these decisions.

[bigbrother05]

18. Because no one in the * admin wants a job in the Auto Industry?

Why would anyone want to build a competitive product when there is way more money in "building" a pseudo financial product?

[Greyhound]

28. Be honest nobody on Capital Hill, on either side of the isle.

We can't fool ourselves, neither the Republiks nor Democrats have more than a handful of representatives that give two shits about us.

The Democrats just suck a little less.

[DefenseLawyer]

33. Absolutely right. n/t

[democracy1st]

2. yep keep getting rid of that American manufacturing base...

:wtf:

[lob1]

3. Don't the Saudis own Citibank?

Bush can't throw enough money at his friends.

[robinlynne]

14. yes they do.

[underpants]

24. ...and the Saudis make sure that oil is traded in US Dollars

supposedly in exchange for "protection" from us. Funny they have now, before as well, turned the protection racket around on us.

[OmmmSweetOmmm]

25. He's just a guy who can't say no.

[MsLeopard]

32. Especially

when he's stealing it from the American people (for generations to come).

[moondust]

4. Let's see their business plan.

Show us their path to viability in a sane, properly regulated environment.

[TahitiNut]

Heresy!

One doesn't ask the Masters Of The Universe to explain themselves or yield to regulation ... regulations like we demand of the automotive companies especially!

The automotive companies actually pay blue collar workers enough (after they gain soe years on the job) to be MIDDLE CLASS! How horrid!

Now banks, on the other hand, they pay their worker-bees very little ... it's the folks at the top that get millions.

[hfojvt]

20. I think I made about $13 an hour at Citi

and that was starting pay for a customer service phone person. Plus they paid sales commission (although I never sold enough to get that) and a 20% premium for working on weekends.

I cannot find a pay-stub to be sure, but I remember clearly applying for a job at Eckerd after Citi fired me. Eckerd was right next to Citi and they advertised "competetive wages". I asked for $10 an hour on my application and never heard from them. Since it was customer service work and I had six weeks of training from Citi, I called to ask why they didn't call me. They said "you asked for $10, we only pay $8.5". I had to laugh at that. Their wages certainly weren't competetive with Citi's.

[BrklynLiberal]

9. That was my first reaction to hearing about Citigroup's bailout.

And prez shit-for-brains is STILL talking about avoiding TOO MUCH REGULATION!!!

[pampango]

23. The reports I have seen indicated that their bailout "plan" included

government veto over executive compensation, dividend payments and, at least partial, government ownership of Citi. The BBC reported it as an "effective nationalization" though I have no idea what they base that characterization on.

If a bailout "plan" is worked out with the auto industry (and I hope it is), some of the same elements (and some new ones specific to the auto industry) should be in that "plan".

[Johonny]

31. from my experience they're plan is corruption

They charged me interest, late fees and the principal on money I already paid them. When I presented proof of payment they were mean and unhelpful. I would argue they make their money on pure illegal business practices and people unwilling to go through the lengthy processes to get their matters resolved. I hate CITI bank.

[BrklynLiberal]

5. I am glad that I am not alone in wondering about the justification for

these two very different decisions. Reich mentions Wall Street's "self-serving view"..and he is absolutely right.

In fact, there may be more reason to do the reverse. GM has a far greater impact on jobs and communities. Add parts suppliers and their employees, and the number of middle-class and blue-collar jobs dependent on GM is many multiples that of Citi.

This is outrageous!!! I hope that after all that labor did for Obama, there is something that his administration can do to bring some balance into this ridiculous situation.

[Tinksrival]

7. Maybe....

From the wiki:

On November 7, 2008, he was listed as one of the 17 members of President-elect Barack Obama's economic advisory team.

[BrklynLiberal]

8. I hope that P/E Obama listens to him...very carefully.

[AllyCat]

6. I've been wondering this too.

I don't think either should be bailed out, but at least it seems reasonable to bail out GM if they come up with a solid business plan. I can't see ANY reason to bail out these banks. And yet, the logic that the government applied to the banks getting bailed out (saving jobs, protecting the economy) does not get applied to the Big 3 which would have a far greater effect on the economy and the lives of ordinary people.

Ordinary people. That's why we aren't bailing out the Big 3. We wouldn't want "socialism" now would we?

[Swamp Rat]

11. They are going after union jobs... the neocons have not left the building.

[Truth2Tell]

12. Ummmmm, because

the money-lending cartel wholly owns our government, our political Parties and most of our politicians? :shrug:

Is this a trick question Mr. Reich?

[truedelphi]

13. Also because the presidents of the various car companies only asked for 25 BIllion

Hardly enough to allow them to restructure their companies, buy some more personal jets, and offer some bribes to Congress.

But with 300 Billion in loan guarantees should defaults occur <wink wink, nudge nudge> Citigroup can count on having more than enough to help Congress help Citi help Congress.

[Truth2Tell]

15. Really, 25 Billion is so 1980s. What do they think this is...

the Savings and Loan bailout? If you wanna piece of the Big Action ya gotta put on your big boy pants.

Call us back when you're ready to ask for 200 Billion guys. Only chumps ask for chump change.

[JDwho]

16. I think it comes out to be more like 326 billion according to the New York Times.

Here's the link:
http://www.nytimes.com/2008/11/24/business/24citibank.html?_r=1&hp

[Sultana]

17. I am sure the oil-rich stockholders could pay to rescue Citi

I rather the money be used to rescue the big 3 automaker instead.

Is there any way to stop this?

[dixiegrrrrl]

19. Robert Rubin is to Citibank what Paulson is to Goldman.

Rubin's 2 protogees have been announced for Obama's Cabinet.

Rubin was Treasury Sec. under Clinton, got Glass-Steagal repealed, moved to Citibank as CEO, started the sub-prime lending tricks there.

Wikipedia knows all.......

Parts of Citi are bankrupt, not all of it.
Yet.

[Bluebear]

21. Because when it's a white collar, the check book is open. When it's a blue collar, too damn bad.

Union busting asses.

[Blue Gardener]

22. I am totally disgusted by this whole situation

The same conditions should be applied to the banks as well as the auto companies. Obviously, that isn't happening.

[Romulox]

26. Waiting for DUers to mount an in depth review of corporate governance at Citi...

<crickets>

[JCMach1]

27. How about breaking CITI up as part of any bailout...

I am sorry, but if an institution is TOO BIG TO FAIL, it's too big to exist!

[jfkraus]

29. Helping the Workers is Socialism.

Helping the rich, inept and corrupt owners with government crack is Capitalism. That's what we're all about. Now shut up and eat your cake!

:sarcasm:

[specimenfred1984]

30. Not 1 mention of the word "CRIME" and therein lies the problem

Until these self-serving asshat criminals are arrested for looting America, there will be no recovery. The bullshit that people spew about finance being to difficult to understand is just a cover for crime.

[Better Believe It]

34. And Reich, allegedly labors friend, calls for another round of "substantial sacrifices" by workers!

" and workers should have to make substantial sacrifices before taxpayers should be expected to sacrifice as well."

Thanks Robert. Another phoney "friend of labor" until the going gets tought. Well, you did support NAFTA and the deregulation of Wall Street so we shouldn't be surprised.