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Monday, November 24, 2008

The Trouble With Citigroup

Citigroup became the very latest domino to fall in '08's Great American Bank Bailout. According to today's Economist, we will guarantee $306 billion dollars of bad mortgage debt and give them $20 billion in cash in return for $27 billion dollars in rapidly dropping Citgroup stock. What a deal!

How did America's largest bank find itself in such desperate straits? Greed, lack of oversight, and...did I mention greed? According to the Times, David C. Bushnell, Citigroup's senior risk officer, was buddy-buddy with the traders he was meant to oversee.

It was common in the bank to see Mr. Bushnell waiting patiently — sometimes as long as 45 minutes — outside Mr. Barker’s office so he could drive him home to Short Hills, N.J., where both of their families lived. The two men took occasional fly-fishing trips together; one expedition left them stuck on a lake after their boat ran out of gas.

Because Mr. Bushnell had to monitor traders working for Mr. Barker’s bond desk, their friendship raised eyebrows inside the company among those concerned about its controls.

"Hey, Dave, remember that time we ran out of gas on your boat?"

"Yeah, Randy?"

"That was awesome!"

"Sure was, Randy. But not as awesome as the time I helped you take on billions in unsecured mortage debt, which would later almost cause our whole bank to collapse!"

"Yeah, that was wicked. But, hey, we still have our jobs."

And there's the rub. The good news today from the Washington Post is that the Obama Deal sounds like it will be $700 billion on infrastructure and jobs. The bad news is that tax cuts are included with that package, which will make it all the more expensive eventually. And that Obama is being advised by former Clinton Treasury Secretary Robert E. Rubin, who was (who woulda thunk it?) an 'influential director and senior advisor' at Citibank!

NO, President-elect Obama. No damaged goods. They made the mess, they do not advise on the clean-up. Or do you need to be reminded of the current Treasury Mess, Hank Paulson? Send Rubin away. Now. We're watching.

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