Rescuing Citigroup

What happened

The federal government agreed to guarantee $306 billion of troubled assets held by Citigroup and extend the bank $20 billion in cash, after Citi shares dropped 60 percent last week. In return, the government gets $27 billion in preferred shares with an 8 percent dividend and final say on executive pay packages. Citi will have to absorb the first $29 billion in losses on the toxic assets. CEO Vikram Pandit keeps his job. (Bloomberg)

What the commentators said

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The Citigroup bailout plan is “weak, arbitrary, incomprehensible,” said James Kwak in The Baseline Scenario. “Since everyone assumes Citi is too big to fail,” the plan had to be big enough to assure that it doesn’t—but it isn't. It can’t be used as a model for other bailouts. And it isn’t even “a good deal for the U.S. taxpayer,” who’s taking all the risk.

Well, “it is a marvelous deal for Citi,” said Robert Reich in his blog, and it should lay to rest any doubts that Washington favors “Wall Street over Main Street.” Remember, a million auto workers, six million mortgagees, and millions of other struggling Americans “are getting nothing at all.”

It’s not like the deal has no strings attached, said Robert Preston in BBC News. Recently “the biggest bank in the world,” Citigroup now can’t even pay a dividend above 1 cent and has very nearly been nationalized. “This is the end of Citigroup’s cherished commercial freedom, its long swaggering history of bestriding the globe as a banking giant.”

So why are Pandit and other top executives keeping their jobs? said Ian Welsh in Firedoglake. “If they were capable of manging Citigroup properly, they would have done so” already.