Citigroup's Self-Immolation and the Beginning of the Eclipse Of American-Style Capitalism
Consider this: Citigroup Inc. has ended last year holding at least $18 billion in mortgage-backed junk which they have had to write off. Their share price has been halved in a year causing their shareholders billions in losses. From a venerable bank, they have been reduced to a tincup institution, selling parts of themselves at fire sale prices. All this, while recent legal discovery has increased their liability exposure to the Enron bankruptcy.
For their management skills, the following awards have been visited on the Citigroup visionaries. Vikram Pandit, Cititgoup's new CEO, after just six weeks on the job has been awarded a $26.7 million stock bonus and 3 million in stock options. This for a man who when he was appointed to run trading, investment banking and alternative investments at Citigroup in early October caused Deutsche Bank AG analysts to pronounce that "... to restructure the investment bank means that changes in the Office of the Chairman, which we feel are needed, are unlikely to be forthcoming." Thus according to Deutsche Bank's prescient assessment, Pandit's appointment showed nothing more than that the past was prologue.
For his brilliance in 2007, CEO Charles "Chuck" Prince who was replaced by Pandit in December, was awarded $10.7 in stock in addition to a $13.2 million cash bonus. Wrecking franchises seems to be good work if you can get it.
Robert Rubin, the former U.S. Treasury Secretary, who after pocketing $100 million over the last nine years for being asleep at the switch, (and according to yesterday's New York Times "urged Citigroup to become more actively involved with in-vogue areas like structured credit, pools of securities backed by different assets, and commodities") told the board's compensation committee he didn't want a stock bonus this year (the previous year's payout was $6.81 million in stock plus an $8.4 million cash bonus). A true "geste d'estime" (gracious gesture) from someone with Rubin's public profile, would be to return the full $100 million. Now that would send an undeniable message and set a new standard of responsibility and accountability.
But here is the key. While all these "executives" were wallowing in "gravy" Citigroup had the effrontery to announce almost simultaneously that it was cutting 4,200 jobs! 4,200 jobs lost, 4200 families in distress. Shameless is hardly too strong an adjective. By proceeding with such unfairness, in such a one-sided and callous manner, Citigroup has become the poster child of so much that is wrong, and much of what is happening throughout corporate America.
Foreclosures, lost jobs and lost futures, for the middle class and the unempowered, while the corporate bigwigs dance off richer then ever before. It is a sign that American capitalism has grown rotten at the core. The capitalist impulse, the kind that made a Bill Gates possible, that nurtured his exemplary vision, making him rich and all of us as a society richer, is under attack by vested and influential interests that have stacked the game to such one sided advantage, that it is on the verge of losing all credibility and crushing our confidence in a system that was a meritocracy and a beacon unto others. It is obscene and a healthy society cannot permit it to continue.
The Citigroup bell has tolled!
Comments for this post are now closed
Want to reply to a comment? Hint: Click "Reply" at the bottom of the comment; after being approved your comment will appear directly underneath the comment you replied to
What will the American economy be eclipsed by? Compassion? We should have learned by now that pure capitolism leads to a wealth disparity that is only now becoming problematic for the whole system. Economic slavery works for the rich landowners. And the CEOs walk away with the spoils, while the laborour loses their job (causing them to default on a loan, just like their neighbors and their neighbors who were also employed and formerly capable of making the payments, but who are now focused on surviving, and that means cutting costs--like jumping credit card debt, that, while important, doesn't take presidence over food, water, gas, or shelter.) Yes, let's hope that formerly American-style capitolism is eclipsed--by real solutions.
It has always been my opinion that Woodrow Wilson was by far the worst President America has ever known.
This man literally destroyed his own government for what is now going on 100 years.
You think Bush is bad?
Woodrow Wilson on his death bed was quoted as saying "I have destroyed my own government"
How right that scumbag was.
In total contrast to Wilson was Andrew Jackson.
Despite any personal differences I may have with Jackson, he was a real American who ACTUALLY cared about the majority of his countrymen.
A bit of trivia for those who actually value knowledge.
What words are engraved on Andrew Jacksons Tomb stone???????
OK, let's work out a solution here.
---
1. Back to basic math: $29,700,000 for Pandit, plus $23,900,000 for Prince, plus $100,000,000 for Rubin = $153,600,000. That nice sum, divided by 4200 lost jobs = roughly $36,570 per job. That's not a huge amount of money in this day and age, but I'd bet that the folks who lost their jobs would gladly take it. One partial solution to the problem would be for Citigroup to take the dough back from the leeches who got it for running the corporation into the ground and deliver it to the folks who paid for it with their jobs.
---
2. The CEOs are paid a LOT of money for apparently knowing nothing about management or economics. I personally also know nothing about management or economics, but I'll take the job for a mere $100,000 per year. This would save Citigroup and their shareholders quite a bit of dough, and the company couldn't possibly end up in any worse shape than it is now, because I would impart such wisdom as "don't buy any more mortgages that were sold to someone with no job, no income, and no assets." (OK, Citigroup, you may pay me $100 for that bit of common sense. Ask Huffpo for my e-mail and I'll give you my address).
---
3. Combine proposals 1 and 2. Require Citigroup to hold a lottery. Every laid off employee's name goes into the hat. Pick one lucky former employee; that person gets to be the chair of the board for a year. Everybody else gets their job back.
I love to see knee-jerk comments about capitalism.
Let me ask you: when the federal government is a senior partner in all the skulduggery, what is the proper term?
Was there ever a failed government chartered bank in the U.S. that was not propped up? Go back to the Bank of North American that inflated the economy by 42% and slithered away with a pat on the head.
C'mon, guys and gals. The con has been worked for ages.
Look at that wonderful humanitarian, Woodrow Wilson, who campaigned for re-election in 1916 on the basis the 'kept American out of a European war' even as his mentor, Col. House, was over in Great Britain arranging the secret treaty to bring the country in useless World War One. [Confirmation in William Jennings Bryan's memories, vol 2. He was secretary of state then but out of the loop, as we say now.]
Today is only a repeat of yesterday.
that is the problem. The rich know there is no hell, ergo they take what they can amass.
There are no laws for them either, they can buy their way out of it. How many rich do you see
in prison. During Bush's term the caught crooked CEO serves a max. time of 2 years and gets to keep his money. Remember the junk bond king, Michael Milken, is among us again and making money.
A few centuries ago these same CEOs would have been wearing eye-patches and flying the Jolly Roger.
Recent reports on the death of capitalism have been highly exaggerated.
Government "fixes" prolonged the depression. Government: stay out of it and everything will be ok.
Mr. Learsey,
Interesting:
"The Citigroup bell has tolled"
For the life of me, I cannot explain why it took 27 years to become clear that greed does not stand a chance-that the law of Dinosaurs
is ever at work.
Are you familiar with the law of Dinosaurs? Well, let me explain it. The Dinosaurs roamed the earth millions of years
ago. They were the king of the road....so
extinction.
Well, the same law still applies. Let me give you just a few names as examples of places that grew to big for their own good:
Pan Am; Eastern Airline; Trans World Airline; Enron, Ciitigroup, Nabisco, Federated Stores;
and let me tell you of others on the same road:
Banana Republic(are they still around?) K-Mart; Duane Reade; StarsBucks, well they are too numerous to mention.
I also will share with you, my wonder, as to why it took since 1980 to Now, to understand that human nature, being what it is, deregulation does not work. Let me repeat that deregulation does not work. A great deal of what is affecting the economy today is the result of the famous, conservative call for deregulation. It is like putting, let me be nice, the fox in charge of the chickens.
Furthermore, I wondered from way back, the ridiculousness of "Golden Parachutes" for incompetents; and also why did the top of the organization, who did the least work, get paid more than the workers who produced the wealth?
Let say it one more time: "Deregulation does not work."
For "Whom the Bells toll?" They are tolling for business as usual.
Yes, we can!
Enough said.
Becoming a CEO is little more than a license to steal from shareholders and workers.
It will continue unless those that manage large companies are made personally responsible for the losses they incur and their own deliberate mismanagement.
Why do stockholders allow their employees (The CEOs and Boards of Directors) to get away with this bonus welfare every time? If your company has lost money, shouldn't you, as the CEO, also lose money? This is the Bush Administration model: never apologize, never acknowledge an error, never show a scintilla of grace or modesty. There is a special place in hell reserved for these greedheads. Eat the rich and give their assets to the poor.
doughnut holes for everyone..
The most effective way to deal with these cases of undeserved compensation would be to follow the European example and force a change in the composition of corporate boards, legally compelling corporations to include labour and shareholder representatives as directors. Not that I think that's going to happen. At least if tax rates are boosted for such ridiculous pay levels the incentive to have such levels of pay will be undermined.
Didn't Clinton decide to reverse the law the said banks had to be seperate from investment banks and lots of the problems we are having now are related to that bad decision?
I paid off all my credit cards and closed the accounts. Do I get a cookie?
P.S. I need a job, if you know of anyone that's hiring.
It is called Crony Capitalism ...and Congress is chief sycophant and enabler ...
Loading comments…
Posted January 28, 2008 | 06:51 AM (EST)