A Fool And Your Money

Officially, US taxpayers have bailed out Citigroup multiple times with $45 billion in TARP loans.  Unofficially, the number is much higher.  Tim Geithner, who was supposed to be so perfect for the job that we could overlook his tax evasion, is to blame for most of the Citigroup mismanagement according to Henry Blodget writing for Tech Ticker.

When Citigroup was first bailed out, the TARP funds were considered a loan.  When it appeared that Citigroup might fail anyway, but was regarded as too big to fail, we converted a portion of the TARP bailout into preferred stock.  Despite being 100% unconstitutional, this did give the unwilling taxpaying public the opportunity to earn dividends and have a controlling stake in Citigroup.  Eventually Citigroup would pay us back by buying back the preferred stock, and the unwilling taxpaying public would hopefully make enough money to pay interest on our loans from China.

Instead, any chance for profit was ruled out when Geithner’s Treasury Department granted Citigroup a private IRS ruling that will reduce their taxes by $38 billion dollars.  This is money we will never see again.  Democrats spent a great deal of time talking about Bush’s tax cuts for the rich.  Will any of them comment about this huge tax cut for this corporation?

Geithner also decided to convert our preferred shares into common stock.  As Blodget points out, not only did we lose our ownership leverage, but Geithner converted our shares at $3.25 when the stock was only worth $1.60.  To put that in layman’s terms, Geithner took the government’s 34% ownership in Citigroup valued at $25 billion and converted it into a 34% ownership in Citigroup valued at $12 billion.   Happy birthday Citigroup.  For anyone keeping track, that’s $45 billion in TARP loans, $51 billion in free gifts from US tax payers gift-wrapped and hand delivered by Treasury Secretary Tim Geithner.  I hate to harp on the issue, but we have a Constitution specifically to prevent this type of theft from happening.

It gets better.  Citigroup then decided to pay back the portion of TARP that we hadn’t traded for now de-valued stock.  You can’t blame Citigroup for wanting to get out from under the watch of the Pay Czar and the illegal regulations the Obama administration added to TARP after the fact.  Nothing has changed at Citigroup, so despite all the money we have given to them they don’t have $20 billion to pay the government back.  They decided to raise it by printing and selling additional common stock.  Again, in layman’s terms, the government’s 34% ownership stake in Citigroup is now only a 26% ownership stake.

With the value of a share of Citigroup common stock selling for only slightly less than a Big Mac already, I wouldn’t be too excited about the government getting our money back.  After all, considering Citigroup is basically in the same shape it was before we gave them nearly $100 billion in taxpayer funded aid, would you be jumping to buy when the government sells their 26%?

Remember all that talk during the campaign about Wall Street and Main Street?  Check the score.


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