Saving Citi But Not GM

I don’t know which is more insulting to Detroit, as Congress makes the automakers grovel for a bailout. That in one night, with no oversight from Congress, Treasury just risked $300 billion of support for Citigroup. Or that, on top of that, Citi got $20 billion in funds from TARP–more for just one company than any one of the Big Two and a Half had requested (and that’s on top of $25 billion that Hank Paulson has already dumped into Citi)? And while offering this massive bailout for one company, our government had the audacity to claim,

  • We will exercise prudent stewardship of taxpayer resources.
  • We will carefully circumscribe the involvement of government in the financial sector.

Uh huh.

Why isn’t Richard Shelby, ranking member of the Senate Banking Committee, on my teevee talking about the failed business model of our entire financial sector?

33 replies
  1. klynn says:

    To Washington the people must go…to make our point. After all, it is our money.

    How about giving the same to “do list” to Citibank in regards to restructuring, regulation and accountability that was given to the auto industry?

    How would the 3 million workers related to the auto industry look in Washington just walking in a group?

    Thanks for the post EW.

    (I did read this was done actually to stabilize a number of overseas banking relationships and that we “had” to do this…)

  2. emptywheel says:

    Citi services my mortgage.

    Can I stop paying it now, since Citi got my city’s bailout money? We’ll just have a mortgage strike with everyone in MI refusing to pay.

    • klynn says:

      Imagine, people writing Citi with “My account is paid in full because you got my tax dollars.”

      THAT is a fun thought.

      BTW, just an aside to slip to the auto CEOs. They need to drive their best hybrid design or even one of their new concept hybrids to the next meeting in Washington. And, if they do not have a good one on the block, then snap up one of the design shops competing in the X-prize and drive in one of their cars with a promised partnership to create joint new hybrids.

    • readerOfTeaLeaves says:

      Ditto, Citi gets my monthly $$.
      FWIW, anything Congress passes on the ‘bailout’ front that doesn’t have additional positions for **forensic accountants and investigators** should be ridiculed loudly and vehemently. In addition, Congress would need to fund the DoJ positions to support the FBI work.
      As far as I’m concerned, any talk of a ‘bailout’ that fails to include additional FBI and DoJ anti-fraud measures is just more ’salt in the wound’.

      But this:

      Why isn’t Richard Shelby, ranking member of the Senate Banking Committee, on my teevee talking about the failed business model of our entire financial sector?

      This would be GOP Sen Shelby of Alabama — the very state where Rove coordinated with Bus$hCo DoJ appointees to indict the former governor, Don Siegelman, and put him in federal prison on trumped up charges…?

      This would be GOP Sen Shelby of Alabama, who no doubt helped move through some of the legislation affecting ‘derivatives’ and lack of regulatory oversight on Wall Street and in options markets…?

      GOP Mensa, Sen Shelby of Alabama is surely not about to do anything that tarnishes his self-imagined luster, omniscience, and stupidity. But pardon me for stating the obvious.

      • acquarius74 says:

        Wasn’t Sen. Shelby of Alabama the Chairman of the Senate Banking Committee until 2006 when Dems got majority and Chris Dodd took over?

        Looks like this current mess took root and became bloated on his watch.

        • readerOfTeaLeaves says:

          He was Chair of Sen Banking, and what we now see must surely have taken root and the inflammation began under his chairmanship — so obviously he’s going to blame Dodd as fast as he can.

          Everyone makes mistakes.
          It’s when people fail to own up to their mistakes that I lose all patience and my urge to ridicule kicks in.

          I hope Sen Shelby becomes a public mockery, a defrocked, humiliated public example of what happens when a person continues to entrench themselves by lying.

          Must be hard to have had all kinds of people curry favor with him, boost his ego, and now that the meltdown is in full force he’s evidently utterly incapable of even an iota of taking any responsibility.


          • acquarius74 says:

            Thank you, ReaderOfTeaLeaves.

            Sen. Chris Dodd was on Charlie Rose for the hour tonight (11/26). If you missed it, it’s really worth watching. He also stressed the need to regain confidence. I think he realizes we’ve been lied to so much that confidence will be slow in returning. He doesn’t seem to get it that we don’t care to hear anything from Bush or Paulson – the consumate liars.

            I still think Paulson/Bush’s refusal to help GM/Ford/Chrysler is a political thing; retaliation for the UAW campaigning so strongly with money and work for Obama. BushCo do not give a rip what happens to the industry, the millions of jobs involved, the cost in tax revenue, the hungry people, or anything else. Paulson let Lehman Bros. fail because of a personal vendetta.

            Sen. Dodd is concerned about the further damage that is possible between now and Jan. 20, ‘09. It’s not too late to impeach the entire executive branch. It won’t happen, but it should.

  3. NelsonAlgren says:

    We all know Shelby is a corrupt crook(There goes any chance of a job in the Obama administration now!!), but there has to be more too it. After all, I doubt Shelby’s constituents want Citi bailed out either.

  4. klynn says:


    Do you know a figure on how much in research grant money U of M and Mich St receive from the big 2.5 and the UAW? I have been trying to get that information but have been unsuccessful.

    Additionally, I know Greenfield Village of course has an endowment from Ford and many staff members are UAW but has anyone there done an article to fully layout the impact on one of the country’s model living history museums?

    I am shocked the print and broadcast industry has not joined the chorus. A 30% drop in advertising across the board is going to snap most. And that does not include the trickle down to the advertising industry and marketing industry.

    • emptywheel says:

      That’s a good question. I know the GM board room on North Campus is gorgeous, much nicer than the crappy liberal arts board room with no sponsor on main campus is.

      • klynn says:

        I know a large number of engineering students from Ohio State get research internships at the big 2.5 and Honda (a few for Toyota) but mostly from the big 2.5…

        Currently, I am organizing what I call “The List”. It is a list of all US employees and sectors affected from the 2.5/UAW down, and all the spin off sectors affected. I started with the projected figures and sectors from the CAR study and began to do my own research and discovered the CAR study fell woefully short on it’s sector list.

        My background is non-profit administration. So, I have also been researching the breakdown of the non-profit sector to my figures and how many people in regards to human health services, primary education, higher education, intervention services, hospitals, museums, urban development corporations, and other social service providing organizations will be affected and how many clients of such non-profits will be affected trying to clarify what the government will be needing to pick up in terms of the services that were provided by these non-profit organizations or will the government select to just let people fall into despair while totally shutting down whole non-profit sectors?

        So far, what I am coming up with, is not a pretty picture. And there is NO way the remaining foreign manufacturers will make up the difference.

        This is a national security foundational block of the highest order and it is being tossed aside with little regard.

        My biggest concern about publishing my research is what it would do to the stock market once “out there”.

        As I compile “The List”, I have been trying to specify any American company and industry names to help varify The List. My hope is to publish “The List” with as many specifics as possible. Let people see where their jobs fall on “The List” and then ask them to make a call to congress. Most people screaming they do not want the bailout just do not “get” how it will end up getting to their job in the end. People just do not “get” the snowball. Like I called it in my Oxdowns, “Economic Destruction Dominoes” or our prized government “Reverse Stimulus Package.”

        • klynn says:

          One of the BIG trickle down, reverse economic stimulus package industries GREATLY affected by this happens to be Environmental Consulting/Environmental Engineering. I do not know if that may be a hoped outcome because the $$$ being paid to many Superfund sites from the 2.5 and spin-off industries will fold and the Superfund budget has bottomed out to begin with. Obama and H. Clinton co-sponsored a bill to try and refund the Superfund because of the economic development issues in NY and IL regarding the need to clean up these sites faster. That clean-up and economic development will not happen if the big 2.5 fold.

          I have been researching how many of those sites are shared by the remaining foreign manufacturers and what their liability will become in terms of their financial responsibility as the remaining “solvent participants” on any of those sites. I have also been trying to see how many government jobs will be lost with the result of this industry sector being affected.

  5. slide says:

    This very good point you have made is just another outrage on top of a million other outrages. The government is simply an out of control on going criminal enterprise.

  6. SaltinWound says:

    It makes even less sense now that the government was initially backing Citi to take over Wachovia, instead of letting Wells Fargo doing it. Why?

    • klynn says:

      Good link. I like this quote:

      And yet the specter of incompetent, and worse, DISHONEST management elicits far less anger. GM may not make the best cars, but Citi and other banks sold products that were terrible, destructive, that resulted in huge losses and are wrecking economies, damage crappy cars could never inflict (environmentalists might quibble, but never has so much seeming wealth evaporated in so little time, and with the main culprits readily identified). They paid huge bonuses, yet their 2004-mid 2007 earnings have been wiped out by subsequent losses. But while UAW workers will have to give up on deals cut earlier, in terms of health care and pension promises (entered into, by the way, to bridge difference over wage levels), I guarantee no Wall Street denizen of the peak years will have to cough up one penny of his bonus from those days.

      • readerOfTeaLeaves says:

        Well, I totally hate email (completely burned out from way too much of it the past decade), but please contact me [email protected].


        My state (WA) just announced last week $700 million in cuts to Higher Ed.
        That’s my state alone.
        (Which really, really makes a comment at the end of the previous thread — about how much $$ states have given as ‘incentives’ to foreign auto companies to locate in, say, Richard Shelby’s AL, but I digress…)

        • readerOfTeaLeaves says:

          Sorry, the whole topic of investments, and state and local incentives and revenues from the auto industry is beautifully highlighted in a great comment at the end of the previous thread.

          Apologies for bad grammar!
          (Must. Slow. Down…)

        • Mauimom says:

          My state (WA) just announced last week $700 million in cuts to Higher Ed.

          Compare that to the $400 MILLION that Citibank’s paying for “naming rights” at the Mets’ stadium.

          I want to have a huge, screaming fit every time I think of that. Why, oh why doesn’t the “Invisible Hand” that’s writing those checks to Citi demand a “credit” for the $400 Million that Citi clearly doesn’t “need”?

    • bell says:

      no one is pointing out that the federal reserve is the creator of all the malaise being experienced makes sense they would protect their own( banks ) before they protect an actual company that produces something of value…. until more folks wake up to the federal reserves central role in nurturing this house of cards that is looking a wobbly at the moment, they will continue to bullshit and lie behind their usual smoke and mirrors talk…

  7. Professor Foland says:

    I keep having this weird dream.

    It always comes on Sunday nights. In it, I’ve been watching a stock drop rapidly to zero. I’m hearing about how the company has hundreds of billions of dollars of bad assets on their books and how they are both insolvent and out of cash. In the dream I’m pleased with myself for having seen it coming and having divested myself of any association with the stock.

    Then I wake up Monday morning, and suddenly I’ve paid $1000 and own a part of the company.

    Can anyone here interpret the meaning of this dream for me? Is there anything I do to keep it from recurring?

  8. wavpeac says:

    Whether it be GMAC, GM, Citi or BM…isn’t it all the same problem?? Fraud.

    Plain and simple these banks were engaging in the “If you are poor, uneducated, ignorant or vulnerable, you pay more” philosophy. There profits were huge but based entirely on making money on money…paper wealth vs real wealth. They were soaking the poor with fees, and fraud in their lending practices. While those with good credit had no idea this was going on.

    Isn’t this the basis of the problem…which is in part the philosophy behind the “hedge fund” but the hedge fund is for rich people. (but it’s just paper!)

  9. klynn says:

    sunshine posted this on bmaz’s post.


    The figures in this transcript need to be a full page add in the Washington Post. Or some non-profit group should post those figures that related to the incentives given down South to foreign auto manufacturers in the form of an ad. I somehow thought the South was the bedrock of the “buy American” meme. Boy. I. Was. So. Wrong.

  10. josandpol says:

    The issue with the Big 3 carmakers is a bad business model (they make lousy cars). Even without the subprime-triggered crisis, they would still be losing market share and money because of a broken business model.

    Admittedly, this is a domestic political issue in the US due to the prospect of people losing their jobs. But would the US bail out Toyota if the latter was also in a similar situation – I don’t think so.

    Nonetheless, I think Obama is making a mistake pushing for the bail out of GM, Ford and Chrysler. Doing so will be rewarding poor performance.

    I agree with those who propose to let the Big 3 file for Chapter 11 and go through the difficult but necessary steps to rehabilitate themselves and become truly competitive. Harley-Davidson’s turnaround success story was not because of government support. Rather, it was the result of a deep internal corporate soul-searching that led to a firm resolve to reclaim lost glory.

    Unless the Big 3 fix their broken business model, a bailout is just throwing good money after bad. I am rooting for them to succeed under Chapter 11, so that they can give the Japanese carmakers a run for their money and the car buyers will ultimately benefit from better cars.

    I have already cited the turnaround success story of Harley-Davidson. Let me add another one.

    In the late ’80s, the global electronics (specifically, semiconductor) industry was dominated by Japanese companies. In terms of market share. NEC, Hitachi and Toshiba comprised the top 3. Only three American companies were found in the top 10 – Texas Instrument, Motorola and Intel. The rest were Japanese or European (Philips).

    Intel is fortunate to have a golden product portfolio of microprocessors. On the other hand, TI and Moto realized that for them to remain in the top 10, they had to make drastic improvements in quality and cost. TI strengthened its enterprise systems and partnerships with her vendors. Motorola focused on quality improvements and leadtime reduction.

    Both American companies rose to the challenge of the Japanese dominance in their industry. They made great strides in quality – Motorola was the first winner of the prestigious Malcom Baldridge Quality Award (twice actually, in 1987 & 2002); TI won in 1992. Their programs also resulted to better on time delivery – a must in a very competitive market with extremely short product life cycles.

    By the middle of the ’90s, the top 6 semiconductor companies in the world were three Japanese, Intel, TI and Moto – not necessarily in that order. Except for Intel who became numero uno because of the success of Pentium, the rankings from 2-6 often changed and were mainly due only to forex conversion. In short, the two American companies gave the Japanese a run for their money.

    TI and Moto succeeded because they worked on their weaknesses, had a clear plan and strong desire to compete and fight for market domination. They did not ask for any government bailout or funding.

    In the case of the Big 3, US House speaker Nancy Pelosi put it very succintly: “Until they show the plan, we cannot show them the money.” At this point, my stand remains – a bailout is throwing good money after bad, given the past financial performance of the Big 3 and lack of strategic initiatives they are offering for the future.

    Chapter 11 will take away the crutches and force the Big 3 to compete for survival and eventually, dominance – if they really want to fight.

    • readerOfTeaLeaves says:

      I haven’t read any comments around here that don’t seem to want improved, efficient, successful companies. However, you seem to have missed a really important earlier thread on which EW pointed out that in many respects this is about saving the PATENTS.

      Patents (intellectual property) will go to whoever is first in line in any number of scenarios, if the Big 2.5 fail. That means that all research done on the Volt, for instance, falls into the hands of the Chinese (or whoever gets their hands on them).

      That would very likely make it more difficult, going forward, for the US to produce quality, viable electric autos — because we’d have to pay the patent owners for every single use (of every single patent) for the new electric vehicles.

      Clearly, there are large forces who would prefer to get their hands on these patents, and then charge us to use them. Other forces would clearly prefer that we remain wedded to oil-based transportation, so it’s in their interests to see the Big 2.5 go under.

      Sen Richard Shelby of AL seems to be a handmaiden to those forces, all of which present obstacles to retooling toward a greener economy — which GM is clearly attempting with the Volt, on which it currently holds key patents.

      Without insulting any non-US companies or citizens, from a practical point of view it is extremely important to keep the companies afloat and the patents in US control. Or at least, that’s the way it appears to this onlooker.

      EW has a detailed post here:

      • josandpol says:


        I am not proposing to close down the Big 3. I clearly wrote that “I am rooting for them to succeed under Chapter 11, so that they can give the Japanese carmakers a run for their money and the car buyers will ultimately benefit from better cars.”

        However, I do not believe that a direct bailout is the right way to help them either. Much of the Big 3’s troubles are self-inflicted – they are victims of their own incompetence. Even if they are bailed out but they do not fix their business model, even most American car buyers will continue to buy Toyotas, Hondas, even Nissans and Kias.

        As a poster in another forum wrote: Going through Chapter 11 doesn’t mean curtailment of services. The whole point of rehabilitation is to temporarily protect the company from its creditors so it can prioritize its cashflow to critical areas.

        Chapter 11 will force the Big 3 to become efficient, or close down.

        • bmaz says:

          What you don’t appear to realize is that Chapter 11 is effectively a death knell for GM; they might just as well file Chapter 7 and liquidate. To be able to reorganize under Chapter 11, a debtor in possession needs interim financing. It is not available; if financing of any variety was going to be available they wouldn’t need BK. Even if the government were to agree to the debtor in possession financing, the studies show (and they have been done) that there will be approximately an 80% drop off in customer purchase potential simply because the term “bankruptcy” is associated with the company; not viable with that kind of customer drop off.

          So, yeah, Chapter 11 does indeed “mean curtailment of services”. Also, the term “bailout” is a fraudulent misnomer. GM is asking for a simple bridge loan that will be repaid. Similarly, their current “business model” is actually much improved already, they simply need a chance to continue implementing the changes already well underway.

    • nihil says:

      You don’t mention that Robert Noyce (co-inventor of the integrated circuit) CEO of Intel led a successful campaign for govt
      1. to allow US companies to bypass anti-trust laws and cooperate in R&D (out of which grew SEMATECH and ultimately world-wide cooperation among all major semiconductor mfr’s in planning and technology exchanges
      2. to force Japan to buy 20% of its semiconductors from US firms or face huge tariff walls

      3. Intel abandoned semiconductor memery production (it had invented it) and concentrated on micro processoes — producing the 386 in 1985(?) which made them rich and successful (by their own hand!)
      4.After the (”floating point error” in the original Pentium led to a megamultimillion dollar voluntary (after some waffling) recall.

      Government action was absolutely essential to the surivival of semiconductor mft in the US. Today, in most years, Intel’s profits exceed the sum of profits of all semiconductor mfrs in the US and the world. Well worth saving.

      Government protection (big tariffs, gradually reduced) was essential to the survival of Harley-Davidson which sells lots of hogs at huge prices in Japan.

      Government protection in the form of a 17% tariff for small trucks was essentialto the survival of that industry, but Nissan and Toyota burrowed under the tariff wall in plants in Tennessee and Kentucky. Toyota exports some American-made models to Japan. US ow has a Hyundai Plant in Georgia.

      Low US labor costs,Sec. 14(b)of the NLRA (allowing states to forbid union security clauss, and huge state inducements were essential to attracting BMW to S.C. and Daimler Benz to Alabama. Eachof these plants was soon surrounnded by parts and service companies. VW had a Rabbit plant in Pennsylvania.

      So much for the glories of free trade.

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