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Government could own more of Citi
A Citibank branch in Washington, D.C.
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Renita Jablonski: C is for Citigroup. C is also for common, as in common stock. The Wall Street Journal reports this morning the government may end up holding up to 40 percent of the company's stock. Marketplace's Dan Grech has more.
Dan Grech: If the government were to buy up Citigroup common stock, that would shore up the bank's wobbly finances at a critical moment. The Federal Reserve is expected this week to perform a battery of stress tests to gauge the financial health of U.S. banks.
The money for the government stock purchase would come from the $45 billion in bailout funds already committed to Citigroup. That means it wouldn't cost taxpayers any extra money. On the losing end: Citigroup's current shareholders, whose ownership in the company would be diluted.
But banking consultant Bert Ely says even shareholders could benefit from this deal:
Bert Ely: Better to own a piece of something that succeeds than to own an even larger piece of something that fails. And that's why they almost have no choice but to go along with this.
Federal officials didn't confirm their plans for Citigroup this morning. The government says it will unveil its revamped program to help troubled banks later this week.
I'm Dan Grech for Marketplace.
If it's true that Prince Alwaleed bin Talal is Citigroup's largest shareholder, then why are the US taxpayers bailing it out? Seems to me that a company owned primarily by a Saudi prince with several wives, 300 cars and two castles - one with 317 rooms - ought to get a boost from his own country, not ours. Am I wrong?
Citi goes back to the trough. Courtesy of TARP, Merrill Lynch brokers received 100% bonuses last year. Million dollar producers were given million dollar bonuses. Now Citigroup will pay Smith Barney brokers and Morgan Stanley will pay its brokers 100% bonuses as well. These are not just the NY executives most of us will never meet. these are the brokers who probably didn't call last year to counsel clients to lighten up. People called their brokers saying, "the market looks terrible, shouldn't we sell everything?" and were told to "hang in there." This is the equivalent of being shoved into the street and being run over by a truck. Instead of administering first aid to victims, TARP money, the victims' tax dollars, are being used to reward the perpetrators. The ruse is "retention bonus." Let's get real. Where are these brokers who torched their books going to go? Let them go. Brokers are typically paid 30-40% of the revenues they generate. How do you squeeze $1.40 payout out of $1.00 in revenues? Tell the government your too-big-to-fail enterprise needs more bailout funds.
