Sunday, November 23, 2008

What? There's No Free Lunch?

Citibank's imminent rescue will cost the American taxpayer dearly. So will the executive bonuses that Citigroup still, after all of this, plans to pay -- just as soon as they lay off another fifty-three thousand lower-level workers.

Funny how this "bailout" is working out, isn't it? Bad managers for lousy corporations walk away with tens upon tens of millions while the average Joe and Jane who work there in the trenches get shoved out the door with pink slips.

Below is a quote showing how others see our problem... from the decided advantage of Australia, where the Citigroup's full-page promotional ads have not yet begun to run in the daily newspapers and ex-Goldman Sachs executives feel they can speak freely.

There is no free lunch:
The problems of Citibank mean that even if it is saved – and I am sure it will be – it will further contract the amount of credit available to keep American business and consumers active. In the process, it will increase the likelihood of the triggering of trillions of dollars of liabilities in synthetic CDO’s.

All the US politicians are talking about bigger and bigger spending to overcome their problems. The next problem comes when the rest of the world, led by China and Japan, tells the Americans that there is not enough money in the world to fund these rescues, so Americans will have to increase taxes. At a recent Reuters Global Finance Summit, former Goldman Sachs chairman John Whitehead said America's problems will take years to solve and will burn trillions of dollars.

Whitehead points out that at this stage the only proposals on the table involve increasing the US deficit.

Whitehead said: "Before I go to sleep at night, I wonder if tomorrow is the day Moody's and S&P will announce a downgrade of US government bonds.

"The public is not prepared to increase taxes. Both parties were for reducing taxes, reducing income to government, and both parties favoured a number of new programs, all very costly and all done by the government."

Whitehead said that he is concerned that no lawmakers are against these new spending programs, yet none will stand up and call for higher taxes.

“'I just want to get people thinking about this, and to realise this is a road to disaster,” he said.
It will be a disaster if the Bush Treasury Department hands over more tens of billions of our increasingly shaky money to Citigroup and then lets the Citigroup board of directors and executives stay in place while running the show as if nothing had happened.

We say, treat Citigroup no better and no worse than General Motors. Let 'em go bankrupt or fork over the reins of ownership and control to Uncle Sam. Period. The public -- that is, present and future taxpayers -- deserve a lot more for their money than self-serving promotional ads and a worthless promise from a corporate liar to pay it all back some day.

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