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Today the New York Post in screaming front page headlines:
CITI
OF FOOLS
Negligent Bank Board Must Quit!
On January 28th of this year the following post from me appeared on the Huffington Post:
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 underpowered, 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!"
Sorry, I was wrong. The Citigroup bell has not tolled. After announcing a program displacing 50,000 employees, with careers destroyed, families devastated their Wall Street cronies in Washington rallied round with additional bailout billions and billions more in guarantees permitting the reigning nabobs to hold on to their many million dollar sinecures, small portions of which could have saved thousands of jobs. And the rot at the heart of American capitalism continues unabated.
Finally we are reduced to paraphrasing Lenin: "The Capitalists will sell us the rope with which we will hang them" to "Wall Street will sell us the rope with which we will hang American Capitalism."
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Great post, until the last two sentences. The partnership of corrupt, non-productive "businesses" and the totalitarian government that enables it is not capitalism, it's fascism.
Great story of how Citi showered it's Exec's with stock and money then when threatened instead of asking for a partial refund it just laid off 50,000 of it's employees!
Seems like the real problem is the Board is as they can hire and fire the Exec's..
We now have "greedy down" economics where these corporations take and take and give nothing back, where they want a bail out and then spend it on trips and such, move jobs oversees and then cry you can't let a US company such as Chrysler go under- aren't they German owned?
When will the American people rise up against this? or we so self centered we only care if we have the latest iPhone or new hybrid car and forget about this country and what made it great.
The robber barons and monopolization is alive and well.... while the main street Americans will suffer.
Maybe the next Congress will hold some hearings and send some of these guys to jail.
Maybe some ambitious New York DA will do the same and use it as a platform for a run at the Presidency.
There may yet be justice.
Rubin helped ruin Citi. Obama has tapped Rubin as an "advisor" along with his fellow Clintonites, Summers and Rahm Emmanuel--who ran the NAFTA bill for Clinton.
Everyone says give Obama some time to prove himself. I say we don't have time.
"Christopher Whalen of Institutional Risk Analytics, the bank monitoring firm that has repeatedly been right about the banks when the government officials were wrong, had harsh words for the deal. "Pretending that Citi is going to be a going concern I think is silly," Whalen said. "We should be thinking about breaking this company up and redistributing the assets into stronger hands."
http://www.thenation.com/doc/20081208/greider_web
It is time to nationalize these entities, break them up into salvageable parts and get rid of the rest for good.
Citigroup was a poor investment two or three years ago, way before all of this got blazing hot.
Capitalism as we know it has been forever ruined by the greed of those who learned to shamelessly rig the system in their own favor, enshrine their crimes in law and scourge the vast majority of innocent and gullible workers. Now these same Masters of the Universe want us to hand over the entire treasury for decades to come in order to save their bonuses "or else the system will fail"...extortion on a massive scale. Paulson and Bush and Cheney their band of thieves are the most virulent criminal gang since the Nazis. Utterly without conscience or shame.
Their corruption is beyond obscene. Crooks and sociopaths have control. It's silly to expect Obama to solve this short of a purge and wholesale incarceration and then a completely new form of euro-esque "democratic socialism" where the people come first instead of the criminals. That will not happen--yet. Eventually it will, but not before even greater crimes by the wealthy and the political class and even greater abuses of the American people.
While I think its important to question executive compensation, I fail to see how a multi-national company will have any chance of finding a capable leader without providing some sort of golden parachute and/pr guarantee. Executives with skill-sets to run entities like Citi aren't growing on trees and you're going to be hard pressed to find the required personality type willing to volunteer their efforts. If I wanted to take years off my life jet-setting across the world, working 80 hours a week, and stressing over countless businesses and employees, I would want to be well compensated as well.
Citi's board picked individuals it thought could help it get out of the stink it was in, and was willing to pay the money required to do it. If they failed to pick the right person, overpaid the person, or did not tie the person's compensation to performance correctly, than they should be held accountable, and have been assuming that they lost a lot of personal stock value. This includes the board's passive attitude on Rubin, and the recent ship-righting efforts.
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