Posted by
How I see the world on Tuesday, November 25, 2008 12:00:00 AM
It seems yet another major US bank has come forward and asked for a gov't bailout this time it is Citigroup. Thanks to wikipedia here is alittle info on citigroup:
Based in New York City, NY citigroup is the largest banking and financial orginizations in the world. It was formed in April of 1998 from the merger of banking monster Citicorp and financial conglomerate Travelers Group. It was the largest merger in the history of the world. Citigroup has the largest financial services network which spans over 107 countries with nearly 12,000 offices worldwide. They hold over 200 million customer accounts and as of 2008 it was still the worlds largest bank by revenues. Citigroup is the primary dealer in US Treasury Securities.
After days of intense and exhausting debate the gov't and citigroup finally came up with a plan. It calls for the gov't to back some $306billion in loans and securities while directly investing $20million into citigroup.
The $306billion will back mainly commercial and residential real estate loans. Citigroup so graciously agreed to accept the losses on the first $29billion on that. The remaining losses will be shared by citi and the gov't (or you could say by us the taxpayer). Citi will take on 10% while once again the gov't using our tax dollars will take the high hard one and absorb the remaining 90%. Also, it is reported that the Treasury Dept will assume $5billion of the losses.
But now don't get all bend out of shape, citigroup will be issuing $7billion in preferred stock to gov't regulators. These stocks will pay an 8% dividend but unfortunately it will lower the value of the shares held by the regular investors. So basically the gov't is going to use our tax dollars to support this bailout and in doing this will be making somwhere around an 8% return while the share holders will pay higher taxes and earn less on the stock they own in citigroup.
Now I am not against the gov't stepping in and lending a helping hand to those who need it but here is the kicker of the whole thing. Now that they have recieved our tax dollars to help save their failing business they announce that the $400 million dollar head sponsorship deal with the NY Mets new stadium will go on as planned. This on top of laying off some 50,000 workers another way to save money. How can they do this to so many people just before the holidays then tell the world "yea the $400 million deal with the NY Mets will go on as planned"? How about taking that $400 mil and use it to save those 50,000 jobs? I'm not saying Karma is real or not but boy if it is I would NOT want to be those in charge of this deal.