| Oh No! Not Another Bailout! |
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| Tuesday, 25 November 2008 04:45 | |
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It was no big surprise that the U.S. government stepped in to bail out Citigroup by guaranteeing $306 billion worth of toxic assets plus another capital injection to the tune of $20 billion. It was no surprise because Citigroup is simply too big to let fail. This latest bailout news caused the markets to rally with the Dow climbing another 397 points. Bank shares also rose including Citi which had a 58% gain over its closing price of $3.77 on Friday November 21st. So for the time being there is relative, though temporary, optimism in the otherwise flailing markets. While the plan does call for certain measures, such as monitoring executive compensation, it falls far short of something we should get seriously euphoric about. I’d prefer to see a little more structure to these bailout plans, one that treats each corporate debacle on a case by case basis instead of what we have now: a one size fits all policy we might as well call UCPR, “Universal Corporate Rescue Plan.” How this Citigroup plan is supposed to instill a shred of confidence in the financial system is beyond me. If the Feds can’t start by first digging out the root of Citi’s problems, this fix will amount to nothing more than applying a band-aid to a dying patient. Members of Citigroup’s Board of Directors have been at the helm for eleven years and have failed miserably in their fiduciary responsibilities. It would be fascinating to examine how each and every one of those members have adhered to their board responsibilities, including exercising accountability to shareholders. I suspect there wouldn’t be much there to sift through. I think the whole lot of them should have resigned along with Chuck Prince back in November 2007. Knowing what we know now, it’s hard to believe that the rest of them had the audacity to hang on to their positions. Do you recall the first thing Vikram Pandit, Citi’s new CEO had promised when he took over the reins last December? He said he was going to review every piece of business the company was involved in. And what pieces did he review? Nada! Zilch! Not a one! Sure, Chuck Prince makes an easy scapegoat, but it’s today’s same board members that had been supporting his bad decisions all those years. In the very least, the Feds should exert more pressure on Citi's board, more pressure on its CEO to divide the company up and sell its valuable pieces, if there are any, because as it is, none of it can stand on it’s own merit. Whoever still thinks that Citi is a viable concern, raise your hand. You’re about to get a homework assignment. |
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