Businesses that politicians deem vital to the national interest
aren’t being allowed to fail in America today, and the bigger
they are, the more help they get from the government. So it’s not
much of a surprise that the fine points of yet another bailout
package are being worked out behind closed doors, this time for
Citigroup.
Again, not surprisingly, the latest recipient of government
largess is a big donor to political candidates and parties. It’s
the 15th largest corporate giver, according to the Center for
Responsive Politics, donating $25.1 million since 1989 in roughly
even portions to the two parties. When Citigroup begged for
taxpayer help, the Bush administration and congressional leaders
took the call. Don’t expect a policy change from President-elect
Obama’s incoming Secretary of Bailouts, Tim Geithner, and Larry
Summers, soon to be head of the National Corporate Welfare
Council.
It’s just the latest in a never-ending series of bailouts that
Chicken Little commentators and status quo fetishists say we
simply must have — or else. Companies aren’t even being asked to
submit to the minor indignity of a bankruptcy proceeding before
lawmakers rush in with 18-wheelers full of cash. It’s easier just
to fork over taxpayer money. Forget Joseph Schumpeter’s “creative
destruction.” Today the rule is survival of the un-fittest.
The complex bailout plan hatched over the weekend for Citigroup
calls for the federal government to back about $306 billion in
loans and securities and invest about $20 billion directly in the
mammoth financial services company. The Citigroup handout brings
the potential tab for Uncle Sam’s ever-expanding bailout
portfolio to almost $7.8 trillion or roughly half the value of
all goods and services produced in the U.S. annually.
But is it necessary? So far all the bailouts collectively have
failed to inspire much confidence in investors. The Citigroup
rescue may lift stock prices briefly but don’t count on it giving
rise to long-term bullishness.
AND IF EVER THERE was a company that didn’t deserve a bailout,
it’s Citigroup, a Big Government lovers’ bank that funds just
about every trendy left-wing cause in America.
Long before it started drowning in red ink, the poster child for
so-called corporate social responsibility was a longtime donor to
left-wing pressure groups such as Jesse Jackson’s Rainbow/PUSH
Coalition and Henry Paulson’s Nature Conservancy. In tax year
2003, Citigroup’s foundation gave 20 times more money to groups
on the left than to groups on the right, according to Capital
Research Center’s 2006 study of Fortune 100 foundation giving.
(Foundation
Watch, August 2006.)
Citigroup’s foundation has given a staggering $1.4 million to the
alarmist World Resources Institute, as well as $509,000 to ACORN
in recent years. The ACORN funding included a $500,000 grant to
ACORN’s American Institute for Social Justice, which offers Saul
Alinsky-style training in community organizing. Other donations
to liberal groups include the Aspen Institute ($762,500),
Rainbow/PUSH ($750,000), Nature Conservancy ($380,000),
Rainforest Alliance ($200,000), and the Council on Foreign
Relations ($50,000).
The company’s 7th Annual Citizenship Report is a dazzling
compendium of all the supposed good works Citigroup claims to be
doing — with its shareholders’ money. It includes reports on its
commitment to diversity and to “sustainable” economic
development, along with friendly greetings from Mindy Lubber,
president of Ceres, the enviro-leftist investment network, and
Janet Murguia, head of the liberal National Council of La Raza.
La Raza, by the way, is the same group, that, along with ACORN
and the Greenlining Institute, helped to cause the subprime
mortgage meltdown. After decades of demanding more loans for
racial minorities, the group performed a dramatic about-face as
mortgage markets collapsed, suddenly warning that lenders,
realtors, and investors who bought up subprime loans could be
sued under a federal law that forbids housing discrimination. It
was the lenders’ responsibility to “match families to the
sustainable loans that they should have gotten in the first
place,” said Murguia.
But in the Citizenship Report, Murguia is all smiles. She asserts
that “[b]y working together, NCLR and Citi can effectively tackle
the barriers to asset development that Latino families face and
eliminate the racial-ethnic wealth disparity.”
Attempting to eliminate that wealth disparity worked out really
well, didn’t it? Now Citigroup faces extinction in large part
precisely because it signed on to leftist groups’ crazy push to
give subprime mortgages to people who couldn’t afford to pay
them.
MEANWHILE, VISIONS of fat underwriting fees and commissions are
dancing in Citigroup’s head. The company is keeping its fingers
crossed that economy-crippling carbon emission controls are
enacted. The company wholeheartedly buys into Al Gore’s global
warming fantasies.
Citigroup Research put out a self-serving report, “Carbon
Trading: The Sky’s the Limit,” last year, that’s irrepressibly
bullish on future carbon-related investment opportunities. The
paper cites the prediction by the CEO of Abu Dhabi Future Energy
Co. (ADFEC) that in 2012 the carbon market will be worth $40
billion, and predicts that cap-and-trade is coming to the U.S.
Not surprisingly, the report extols the virtues of controlling
carbon dioxide emissions through carbon trading, rather than
through the imposition of a carbon tax: Investment firms can’t
earn commissions and fat underwriting fees from a carbon tax.
Last year the company said it intends to direct $50 billion “over
the next 10 years to address global climate change through
investments, financings and related activities to support the
commercialization and growth of alternative energy and clean
technology among the clients and markets it serves, as well as
within its own businesses and operations.”
The boutique Citi Alternative Investments, which manages $60
billion in real estate, private equity, and hedge fund capital
for Citi and select net high worth investors, reports that its
Sustainable Development Investments (SDI) section expects to
invest more than $2 billion of private equity over 10 years in a
variety of green projects, including carbon credit markets.
Will Citigroup come to its senses and abandon its green crusade
now that markets have tanked and every day brings more evidence
refuting the theory of anthropogenic global warming? The jury’s
out on that.
Why don’t we try a radical experiment and allow Citigroup — with
all of its foolish investments and silly distractions wholly
unrelated to making a profit — to fail?
That’s change we can believe in.
