Citigroup is again taking billions of your money. This week’s new bailout
of Citigroup is $20 billion. The company had already received $25 billion. That’s now $45 BILLION to “help” Citigroup.
Citigroup’s website says: “Citi is today’s pre-eminent financial services
company, with some 200 million customer accounts in more than 100
countries.” Think about it. Citigroup owns banks and operations in 100
foreign countries. If Citigroup needs money, let Citigroup start selling one company in each of those 100 countries. That’s the first way that a global giant can raise money.
Second, a year ago the annual report said Citigroup raised $30 billion in
short order as long-term investors provided new financing. At some price, capital is available to Citigroup even today. Stocks and bond sales could raise the money.
So what’s going on? Why is the U.S. Congress spending YOUR money to rush to “save” this bank? Why wouldn’t Secretary Paulson simply tell Citigroup that there is no bailout until Citigroup takes one of the two steps above. To repeat: 1) Sell valuable assets, and/or 2) issue stocks and bonds at the market price.
You might object that “it’s more complicated” or that “there’s an emergency.” However, every time a share of Citigroup is sold on the
Exchange, that means there is a buyer. That is true. You just can’t
have a seller without a buyer, right?
James Surowiecki in the New Yorker discusses the current stock price
of Citigroup. He just wrote, “In other words, at the moment, you could buy all of Citigroup for only a little more than what it clears in free cash
every year. . . . And if I’m able to buy the whole company for two times
free cash, does it really matter if I have to write down the value of some of its assets, since I’m essentially getting them for free.” I say
that the situation is such that Treasury Secretary Paulson just might
want to buy all of Citigroup rather than handing out corporate welfare.
That’s how nutty this bailout has become. Absolutely NO discussion
is occurring that says the capital marketplace of capitalism can function.
Like Citigroup selling its companies, GM can sell Chevrolet. Ford can
sell Mercury. And that’s the way capitalism works.
References:
The New Yorker, November 21, 2008:
The Citigroup Perplex by James Surowiecki.