Friday, February 27, 2009

Citigroup steals your money again.

I'm angry. Again. Today, you're going to read about Citigroup "striking a deal" with the government. What is happening is that someone is coming along and seeing a company which can be purchased in its entirety for $10 billion (Citi's market cap) and that person is giving them $45 billion for about a 30% stake.

Would you pay $45 billion for a 30% stake in a $10 billion company? No you would not. The government is also converting all its preferred shares to common so that we are the last in line to recoup any money in bankruptcy, and we are also losing the dividend Citi lied to us about paying. There is no other way to view this other than an enormous theft of your money to hand over to rich shareholders such as a Saudi oil billionaire (the largest Citi shareholder) and rich executives who created this problem on purpose. The government was going to take a 40% stake, but Citi executives were bargaining for 20%. It looks like they're unbelievably going to compromise at around 30%. 40% was a terrible theft as it was, and it is hard to believe Citi had the gall to try to talk that number down. It looks like Geithner and Bernanke are dumb enough to let them.

If the market is intelligent enough to understand what is going on, it would flee Citi anyway because its own shares are being diluted and the company will be put into pre-privatization in a few months anyway. No guarantees, though.

At this point I'm essentially not counting on anyone in a leadership position being intelligent enough or having the proper morality to do the right thing. I'm essentially counting on Congress to get tired of approving massive bailouts. The sneaky Obama administration came up with a clever way to steal your money this time by attaching its bank bailout to the budget this time so that if a democrat rejects it, he's also rejecting health care, carbon restrictions, etc. The immoral administration may get away with it this one more time, but they won't be able to do that again next quarter when Citi, BAC, and AIG "shock" everyone by losing another $100 billion collectively.

1 comment:

Anonymous said...

Culd not agree with you more.

Love, MOM