Citigroup: Take a 40% Stake, Please!

Image by Admit1

Image by Admit1

This does get more and more amusing:

Citigroup is pressing the US government to agree on a new capital injection that would increase the authorities’ stake in the troubled bank to about 40 per cent but stop short of an outright nationalization.

Of course they are.  Not that nationalization would mean much, if Geithner and Summers have their way—as they envision it, it will be just long enough to take all the crap off a bank’s books at taxpayer expense, then they’ll sell it back to the private sector.  It’s becoming pretty clear that even when Geithner and Summers are forced to the right thing, they’ll do it exactly the wrong way.

Perhaps even more interesting is what Massacio points out, that much of the TARP money didn’t actually go to banks and the 25 billion supposed to go to Citibank earlier, actually went to Citigroup—which owns a number of firms:

This is not just a detail. The $25bn never got to Citibank. When Blue America candidate Alan Grayson (donate here) asked the head bankers what they did with the money, he got no answer.

That money isn’t going to increase lending by Citibank. Maybe it became collateral for credit default swaps. Maybe it shored up Variable Interest Entities (p. 116), which are separate legal entities, trusts or LLCs, for example, where Citigroup (or Citibank, the financials don’t separate them in this area) has a significant risk of loss or gain, even if it doesn’t own a controlling equity interest. These are included in the activities of the ICG, that group of losers. If that’s where the money is, it sure isn’t going to increase lending. All it could do is prevent horrendous losses to outside investors.

This is becoming a sick joke.  Nationalize or don’t, but the key issue isn’t nationalization, it’s lending.  Force them to lend, one way or the other, or have the Fed lend directly, but stop playing these games.

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