Willem Buiter: Citigroup Critic Is Bank's New Chief Economist

Outspoken economist Willem Buiter, a professor at the London School of Economics and consultant to Goldman Sachs, has accepted a position as Chief Economist at Citigroup, a bank he's certainly had no qualms about criticizing.

As recently as last April, on his blog at the Financial Times, Buiter has attacked Citi for being, "A conglomeration of worst practice from the across the financial spectrum."

Other criticisms Buiter has made about banks which bear no small resemblance his new employer include this monster:

Citigroup suffers from, "[A] survival of the fattest syndrome ... has turned banks and shadow-banking institutions into monsters of perverse incentives for excessive risk taking. Throughout the north-Atlantic region, concentration and monopoly power in the banking sector will be higher after the crisis than before it."

Which isn't to say Buiter's writings have escaped criticism. Fed Governor Frederic Mishkin has said that Buiter's writings have fired, "a lot of unguided missiles," and former Vice Chairman Alan Blinder "respectfully disagreed" with his analysis of the central bank's crisis management.

A staunch opponent of bailouts, Buiter opined:

"I cannot think of a single financial institution that is too big to fail, in the sense that it would damage some systemically important social institution.... I recognize the upside of bail-outs for those who arrange them: they look like movers and shakers, making and shaping events. It's heroic, in an industry where heroism can be rarely displayed. But in all of the examples mentioned above, the bail-out did more harm than good."

As Salon's Andrew Leonard points out, there is definitely no shortage of irony here:

Buiter will be taking a paycheck from one of the very biggest of the bailed-out too-big-to-fail institutions. Which means, whether he likes it or not, Buiter is being bankrolled with the support of the American taxpayer... and implicit backing of Larry Summers. If Citigroup hadn't been bailed out, would Buiter have gotten this job?

Or, as Felix Salmon put it, it may be better to have Buiter "inside the tent pissing out."

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Comments

[invest in jobs]

03:38 PM on 12/02/2009

Now that Obama tacked unemployment benefits he needs to set his focus no on WALL STREET REGULATION and JOBS

good articles; http://financeopinionss.blogspot.com

20% real unemployment combined with record wall street bonuses will give his political enemies plenty of fodder in 2012

[StopMakingSense2]

04:24 PM on 12/01/2009

Best way to stifle descent is to co-opt it. Way to sell out Buiter. You won't change Shittygroup but it will change you. Welcome to the Firm..

[invest in jobs]

01:38 PM on 12/01/2009

Mr Summers , bernanke, Geithner, Hillary are three people I could stand to see lose their jobs

hat tip to http://financeopinionss.blogspot.com

[CearlJr]

07:25 PM on 12/02/2009

There are 3 kinds of people in this world: those who can count... those who can't...

[TJCole]

12:38 PM on 12/01/2009

Citigroup is a mess and should be Nationalized and reformed completely from within...then we can address everything from Mortgages to Credit Card rip offs the whole enchilada...

And to think, Obama chose Robert Rubin to head his transition team...we never had any chance for change that was just a dream we dreamed...

[blueken]

11:42 AM on 12/01/2009

Now he will keep his mouth shut and get in the line for million dollar bonuses. Don't suppose this is a sign that Citi is ready for that old time religion. Better get a gun son, the natives are gettin restless.

[karen2222]

09:38 AM on 12/01/2009

What exactly does a chief economist at Citibank do?

Regardless, Citi + Buiter seems like a bad fit to me, but maybe he will learn more about the inner workings of the place and the mindset of its leaders and employees, and that will make him better able to advise governments and central banks in future (after the probably inevitable parting of ways) - ?

[PaHairO]

09:21 AM on 12/01/2009

Bribery works.

Next question ...

[FHTB]

05:35 AM on 12/01/2009

They will swallow him alive...mark my words...

Neutralize your enemy...sometimes it works...but it hasn't for Obama with the right.

[Mrphd2b]

11:36 PM on 11/30/2009

The real truth behind Citigroup bailout

What neither Paulson nor anyone in Washington is willing to reveal is the real truth behind the Citigroup bailout.



By his and the Republican Bush Administration’s adamant earlier refusal to take an initial resolute action to immediately nationalize the nine or so largest troubled banks, he has created the present debacle.



By refusing on ideological grounds to instead reorganize the banks’ assets into some form of ‘good bank’ and ‘bad bank,’ similar to what the Government of Sweden did with what it called Securum, during its banking crisis in the early 1990’s, Paulson and company have created a global financial structure on the brink.

A Securum or similar temporary nationalization would have allowed the healthy banks to continue lending to the real economy so the economy could continue operating, while the State merely sat on the undervalued real estate assets of the Swedish banks for some months until the recovering economy made the assets again marketable to the private sector.



Instead, Paulson and his ‘crony capitalists’ in Washington have turned a bad situation into a globally catastrophic one.

http://www.bibliotecapleyades.net/sociopolitica/sociopol_bigcrash25.htm

[Mrphd2b]

11:31 PM on 11/30/2009

4. Economies cannot prosper when the rule of law is destroyed and the government routinely lies. The current crash would have ended much sooner had the government been honest, and people trusted the government. The government’s lies about the Iraq war, torture, spying, 9/11, and just about everything else destroyed people’s trust that anything the government said was true. Even with sophisticated propaganda methods, one too many lies will destroy a government, a country and an economy. In addition, there were many Madoffs - titans of industry and finance and investment who were dishonest. Under the weight of dishonesty, no one trusts each other enough to do business, and the free market shuts down.

[Mrphd2b]

11:31 PM on 11/30/2009

When the History of the Financial Crash is Written
George Washington’s Blog
Friday, Jan 30, 2009
from PrisonPlanet Website

When the history of the financial crash is written, this is what will be said:
1. The federal reserve and its serial bubble-blowing policy, fractional reserve banking, the loss of America’s manufacturing base, huge debts, spending trillions on imperial adventures in Iraq and elsewhere, and insane leverage and speculation using exotic instruments like credit default swaps were the biggest long-term causes of the crisis

2. The government could have prevented the crisis if it had heeded the warnings of those speaking the truth, but because it was politically easier, politicians pretended that they didn’t understand what was going on, and tried to “kick the can down the road” so that it would be someone else’s problem

3. Had the government let the markets deleverage, and let cancer of malinvestment clear itself out of the market, we would have been through most of the worst by the end of 2009. But by borrowing, printing and spending many trillions of dollars we didn’t have, by artificially propping up leverage, and by taking other counter-productive actions, the government ensured a full-scale depression, and ensured that it would continue for years

http://www.bibliotecapleyades.net/sociopolitica/sociopol_bigcrash.htm#Additional_Information

[hellboundtrain]

03:21 AM on 12/01/2009

Agreed. You pretty thoroughly have it covered. And, as a result of all many future generations will be saddled with the debt of all of the inner-workings of this repair of this financial tragedy; the swaps and derivative obligations, too.

Thomas Jefferson had written that it is immoral to saddle next generations with todays debt, but that thought has gone out the window. "Tis an immoral play.

[invest in jobs]

11:03 PM on 11/30/2009

Economy recovering for who?

rec reading: http://financeopinionss.blogspot.com

the Fed , PPT & Goldman runs the economy

bailouts for big banks.

[T4]

10:24 PM on 11/30/2009

There's nothing like getting an Obama banking bonus to help you jump ship. Yeah Obama - you paid an energy trader at Goldman $90 million in bonuses while your bankers at Citigroup foreclosed (we own 36%) on american homes and threw kids in the streets.

[munki]

09:04 PM on 11/30/2009

Not surprised with the comment...

Let's turn it around now...