Monday, November 24, 2008

Citigroup Didn't Sleep...

... just as promised in those national advertisements.

Instead, it stayed awake "in tense, round-the-clock negotiations that stretched until almost midnight on Sunday" to get its hands deep into the taxpayers' pockets:
Under the agreement, Citigroup and regulators will back up to $306 billion of largely residential and commercial real estate loans and certain other assets, which will remain on the bank’s balance sheet. Citigroup will shoulder losses on the first $29 billion of that portfolio.

Any remaining losses will be split between Citigroup and the government, with the bank absorbing 10 percent and the government absorbing 90 percent. The Treasury Department will use its bailout fund to assume up to $5 billion of losses. If necessary, the Federal Deposit Insurance Corporation will bear the next $10 billion of losses. Beyond that, the Federal Reserve will guarantee any additional losses.

In exchange, Citigroup will issue $7 billion of preferred stock to government regulators. In addition, the government is buying $20 billion of preferred stock in Citigroup. The preferred shares will pay an 8 percent dividend and will slightly erode the value of shares held by investors.
Riddle us this: if the CEOs of these failing banks deserve tens upon tens of millions of dollars in annual compensation and bonuses, how big a bonus do the taxpayers deserve for saving their sorry asses?

11-24 am
We thought it was a terrible deal. Now, it seems Nobel prize winning economist Paul Krugman agrees: "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."

In the waning days of the Bush administration, Wall Street is robbing the nation's treasury. It's that simple.

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