Americans Should Get Assurances on “Offshoring” in Citibank Bail-out

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citibank.jpg
Here is a very quick clip of my views on the Citibank bail-out and the importance of realigning the interests of US-based multinational firms that take taxpayer money with the interests of America’s workers. This segment played on PRI’s The World which airs on National Public Radio affiliates around the country.
It may sound perverse, but as things look now, these large institutions are getting funds to make them solvent but are laying off workers left and right. There is nothing that is keeping them from moving even more jobs to lower-wage rate countries offshore.
And oh yes. . .the American taxpayer is financing the offshoring.
Not a good deal.
— Steve Clemons

Comments

20 comments on “Americans Should Get Assurances on “Offshoring” in Citibank Bail-out

  1. damari says:

    I would ask the President to call me before he gives any money to Citibank, they are and practice unethical business. Their lawyers lied to the Department of Fair Employment and Housing, wrongfully terminated me while out on workers comp and all because I wanted to put my daughter first. Now Citibank ask for bail out money from our goverm=nment yet when I wrote to over 200 senators and government people I got no help. They broke California labor codes in the process of firing me, while I was ill. My attorney made over 200,000.00 and checks were sent out to about 2000 people. They want your help but no one would help me and all though they wrongfully terminated. There is greed at Citibank and they knowingly gave mortgages to people who didn’t qualify by pumping up their income and now they want my tax dollars. My attorney said firing me cost them about 3.5 million and I don’t feel they should get or deserve the bail out money. My story is on line, and President Bush’s office never did reply and the people that did just kept passing the buck. Fell free to call me for more details 831-236-0112, or look at the case filed in Monterey Superior court. I lost everything because of them, bad manager Jeff Ursino and they didn’t even follow their own firing Stratford, fired via UPS by CitibankMy husband voted for you and had I voted I would have voted for you. I didn’t vote because when I tried to get help from people I had voted for no one helped, they say to write your congressman for help and they don’t help you, but Citibank asks for bail out money and they get help. where is the justice, what about me, Jeff the plumbers wife? Citibank made the list of the best 100 companies for working mothers to work at, yet they fired me for putting my daughter’s needs first! Where is the justice? Why should we bail them out? I prayed for you all day and watched on my TV, stunning, we are truly blessed to have you. My favorite photo/moment is the thumbs up by your beautiful daughter, which I am sure you also put her needs first. Thanks for caring about our country, God Bless you and your family, may he keep you safe and happy.

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  2. TokyoTom says:

    Steve, I don’t think we should be supporting the bailouts of any of these failing firms, but am surprised by your implication that we should add to our losses by making sure that the failing firms should stay fat and stick close to their unsuccessful business models.

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  3. pauline says:

    “Today, Citigroup, once the nation’s largest and mightiest financial institution, has been brought to its knees by more than $65 billion in losses, write-downs for troubled assets and charges to account for future losses. More than half of that amount stems from mortgage-related securities created by Mr. Maheras’s team — the same products [CEO] Mr. Prince was briefed on during that 2007 meeting.
    Citigroup’s stock has plummeted to its lowest price in more than a decade, closing Friday at $3.77. At that price the company is worth just $20.5 billion, down from $244 billion two years ago. Waves of layoffs have accompanied that slide, with about 75,000 jobs already gone or set to disappear from a work force that numbered about 375,000 a year ago.
    Burdened by the losses and a crisis of confidence, Citigroup’s future is so uncertain that regulators in New York and Washington held a series of emergency meetings late last week to discuss ways to help the bank right itself.
    And as the credit crisis appears to be entering another treacherous phase despite a $700 billion federal bailout, Citigroup’s woes are emblematic of the haphazard management and rush to riches that enveloped all of Wall Street. All across the banking business, easy profits and a booming housing market led many prominent financiers to overlook the dangers they courted.
    While much of the damage inflicted on Citigroup and the broader economy was caused by errant, high-octane trading and lax oversight, critics say, blame also reaches into the highest levels at the bank. Earlier this year, the Federal Reserve took the bank to task for poor oversight and risk controls in a report it sent to Citigroup.
    The bank’s downfall was years in the making and involved many in its hierarchy, particularly Mr. Prince and Robert E. Rubin, an influential director and senior adviser.
    Citigroup insiders and analysts say that Mr. Prince and Mr. Rubin played pivotal roles in the bank’s current woes, by drafting and blessing a strategy that involved taking greater trading risks to expand its business and reap higher profits. Mr. Prince and Mr. Rubin both declined to comment for this article.
    When he was Treasury secretary during the Clinton administration, Mr. Rubin helped loosen Depression-era banking regulations that made the creation of Citigroup possible by allowing banks to expand far beyond their traditional role as lenders and permitting them to profit from a variety of financial activities. During the same period he helped beat back tighter oversight of exotic financial products, a development he had previously said he was helpless to prevent.
    And since joining Citigroup in 1999 as a trusted adviser to the bank’s senior executives, Mr. Rubin, who is an economic adviser on the transition team of President-elect Barack Obama, has sat atop a bank that has been roiled by one financial miscue after another.
    Citigroup was ensnared in murky financial dealings with the defunct energy company Enron, which drew the attention of federal investigators; it was criticized by law enforcement officials for the role one of its prominent research analysts played during the telecom bubble several years ago; and it found itself in the middle of regulatory violations in Britain and Japan.
    For a time, Citigroup’s megabank model paid off handsomely, as it rang up billions in earnings each quarter from credit cards, mortgages, merger advice and trading.
    But when Citigroup’s trading machine began churning out billions of dollars in mortgage-related securities, it courted disaster. As it built up that business, it used accounting maneuvers to move billions of dollars of the troubled assets off its books, freeing capital so the bank could grow even larger. Because of pending accounting changes, Citigroup and other banks have been bringing those assets back in-house, raising concerns about a new round of potential losses.
    To some, the misery at Citigroup is no surprise. Lynn Turner, a former chief accountant with the Securities and Exchange Commission, said the bank’s balkanized culture and pell-mell management made problems inevitable.
    “If you’re an entity of this size,” he said, “if you don’t have controls, if you don’t have the right culture and you don’t have people accountable for the risks that they are taking, you’re Citigroup.”
    much more at —
    http://www.nytimes.com/2008/11/23/business/23citi.html?_r=1&hp=&pagewanted=all

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  4. PissedOffAmerican says:

    Any deals, mandates, or incentives for business to manufacture here in the states will most assuredly include a lessoning of our environmental, quality, and labor controls.
    Heck, if we are going to introduce poison laced plywoods into our homes, poison our infants with melamine, and build our infrastructure out of pure unadulterated junk, we might as well manufacture the stuff here, eh? Save on shipping.
    Meanwhile, monkey boy is makin’ sure we all get to breathe a bit more lead as a fond parting gesture to his adoring admirers. I wish he’d do more to increase the level of arsenic in our drinking water, I like an hors d’ouvres with my lead.

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  5. Franklin says:

    We need a better set of Federal negotiators.
    I think this Citi bailout is necessary, but I’m struck by the almost complete absence of concessions on behalf of U.S. taxpayers and consumers.
    Where are the:
    1. Restrictions on future lobbying activities by recipients of these loans?
    2. Restrictions on executive compensation? (at a minimum executives shouldn’t receive bonuses for the duration of the loan period – ideally they would be putting a share of past bonuses into the pot too).
    3. Restrictions on the size of banks like Citi? I forget who said it, but the saying “too big to fail means too big to exist” seems about right. As part of the bailout package, Citi should be split into more manageable parts.
    As far as the off-shoring angle goes, I think the best way to take this one is through the tax code (e.g. I see this as a much bigger issue than just Citi).
    We need to provide strong incentives for companies to create jobs in the U.S. The idea of putting labor and environmental standards in trade agreements makes some sense too – although the enforcement mechanism could be tricky.
    Increasing income taxes and taxes on capital gains for the big players strikes me as another part of the equation. Using that money to invest in and develop domestic industries strikes me as appropriate.
    If CEO’s and banks like Citi benefit from off-shoring jobs, they should assume a share of the true social costs that come from the loss of those jobs. They’ve been getting a free pass, and that needs to change.
    As far as Citi providing loans to companies who off-shore work, I don’t see this as inherently wrong. In the short-term the labor trade-off is zero-sum, in terms of the creation of new markets over the long-term, and global economic growth, it isn’t zero-sum.
    Part of the problem right now is due to the fact that China and India aren’t yet in a position where they can effectively pull the U.S. economy out of recession through consumption. Within a couple decades though, I can see an economic benefit to the development of these markets (something that would be hard to conceive without off-shoring.
    In the meantime, the loss of good paying jobs is going to prolong the economic recession and make it more painful.
    Longer-term the wage and jobs issue need to be addressed. It looks like the next major stimulus package may begin to tackle that issue.

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  6. Ian Kaplan says:

    Steve: I really want to complement you on these articles about offshoring of technology and jobs. These are critical national security issues, although people don’t usually think of this issue in that light. While Obama has talked about not rewarding corporations for offshoring jobs, it remains to be seen if this is more than words. If a corporation has the times to the United States to ask for financial help, then they should also support their country. This is something that corporations will have to be pressured into thinking about.

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  7. PissedOffAmerican says:

    Offshoring, as well as manufacturing in Mexico, is as much about shitting on the environment as it is about anything else.
    This is unlikely to change, as it was Summers that argued in a World Bank Pollution Memo that developed countries ought to export more pollution to developing countries because these countries would incur the lowest cost from the pollution. And besides, the health of foreigners is even more expendable than American’s health is, although, at the rate this fiend Bush is dismantling five decades of environmental legislation, that may no longer be the case. Got lead?

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  8. PissedOffAmerican says:

    And, uh, why can’t Joe the Plumber, Joe Sixpack, and Sarah Palin handle this crisis for us? After all, the GOP told us they’re qualified, and if George Bush can handle the presidency, surely those three geniuses are up to the task. How come, if Obama/McCain were sharing a list of potential hirees, Obama isn’t hiring these three top guns?

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  9. PissedOffAmerican says:

    BTW, Citi currently has a contract with a sports arena, where they are paying four hundred million to have their name prominently displayed on the arena backdrops.
    Four hundred mil. Such a deal. Lets bail em’ out, I’d hate to see them have to dump such a bargain deal.

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  10. Spunkmeyer says:

    Very good point Steve – and now it looks like Hank Paulson wants
    to issue the rest of the TARP funds after all? Wholesale fleecing of
    the American taxpayer…
    I highly recommend this blog to anyone interested in following the
    financial crisis and reading excellent analysis:
    http://calculatedrisk.blogspot.com/

    Reply

  11. questions says:

    JP Carter,
    If I’m right about this, there’s another order of damage hidden behind the housing crisis. I think a level of the derivatives market is taken up by bets that derivatives would pay — that is, there is NO collateral on these bets, and yet these “meta”debts were bought and sold too. In our student days, we used to talk about spending money more than once so we’d have more money — a birthday gift would go towards a stack of books and then to a restaurant dinner, and then towards groceries, and finally towards a bill. We knew it was a joke, but the derivatives market seems to have used debt the way we used the annual birthday gift.
    Stabilizing the housing market is insufficient given that stable prices relate more to the first level of debt and not so much to the metadebt. Defaults on mortgages come from reasons beyond lowered housing values and so will continue beyond the stabilization of prices, and given the seemingly vast quantity of “money” staked on a simple house and its mortgage, I don’t see a good way out. Hope I’m just ill-informed and it all goes away tomorrow.

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  12. Mr.Murder says:

    File a restraining order if your retirement has any vested portion in their holdings.
    Sue their ass.

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  13. ... says:

    bush came up with pretty good excuses as to why he couldn’t reveal anything either… the federal reserve is a lot more secretive and hidden then his admin, so any excuses they are offering are just that…some will buy them, some won’t..

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  14. JP Carter says:

    The Fed will not release that info for one important reason. The Fed & Banks oppose any release of information because it might signal weakness and spur short-selling or a run by depositors. They feel that, given time, the banks will get back on their feet. Everybody’s books look like shit right now.
    The Swiss took all of UBS’s bad debt and set up a “bad bank”. That is what is happening with the Citi debt to a point.
    Remember, one good hard frenzy of panic on a couple big banking/financial entities and the whole house of cards falls.
    That is the primary driver behind the Fed’s actions. They will print their way out of this and worry about the effects later. That is the only choice they have. Focusing on numbers right now just mucks up your thought process. Look at the big picture: if this economy grinds to halt, we are in for much worse than $5 / gallon gas & housing worth 30% less than a year ago.
    Paulson tried to do the bad bank thing, but expected all the players to say “here are all of my problem items”. The main issue was they did not know what all of their problem items were and they were also hiding many of them in off-balance-sheet vehicles. And every time an AIG, etc. happened, the floor moved underneath them.
    Until you deal with the housing market and stabilize it, as well as forcing banks to lend, this roller coaster ride will go on for some time.
    For the record and full discloure, I had a house foreclosed on by Countrywide (divorce, not a sub-prime or speculator)in 10/08 and I currently owe Citi approx. $18K on a line of credit (Which I got by sending an e-mail reply telling them how much my household income was…). So I think I have a front row seat to this little “problem” were are going through.

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  15. ... says:

    >>The Fed has consistently rejected requests to disclose more information about which assets it is taking as collateral for its lending programs. Bloomberg News sued under the Freedom of Information Act this month, requesting the information; the Fed refused, responding that the information was protected because it is confidential commercial information, and because it is being kept by the Federal Reserve Bank of New York, which it argues is not subject to FOIA.<<
    http://www.washingtonpost.com/wp-dyn/content/article/2008/11/23/AR2008112302700_2.html?nav=rss_business&sid=ST2008112302762&s_pos=

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  16. ... says:

    you folks need to get real.. lets talk about a private business that couldn’t give a rats ass about the welfare of the usa – the federal reserve… if you think you are going the way they do business you are sorely mistaken.. it ain’t going to happen.. they will run you into the ground and have to answer to no one…
    frankly i am surprised they have lost as much control as they have, but it was only a matter of time before this fiat currency house of cards would start to crumble..
    check out germany circa the 30’s when they needed a wheel barrow of marks for a loaf of bread… the us$ is on its way.. it may take a few years, it may take 20, but it will happen.. no need to take down the world trade center…a better idea would be to get rid of greed, a tall order indeed…

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  17. TonyForesta says:

    A thousand thanks Mr. Clemons for shining light on this issue. There is so much money being flown around, and it’s happening with such rapidity, and there does not seem to be any rhyme or reason other than ad hoc responses to catastrophic events of the day, – that it is almost impossible to comprehend where we are, where we are going, and what to do next.
    The problem is that while all the politicians talk about wanting to help the middle class, ALL that has been done in practical reality is heaping even more imponderable debt on the shoulders of our children to bail out the fiends, thieves, swindlers, and pathological liars on Wall Street who are largely responsible for this nighmare.
    No one is truly standing up for the poor and middle class, while the superrich and the predator class are reaping trillions of dollars in borrowed Fed money at tax payer expense,.. For what? What will the middle class get? How does the average American benefit in any way from the Fed hoisting 7.4 Trillion dollars at the finance sector alone.
    We are witness to the final brutal ruthless totally onesided thugging and redistribution of middle class wealth by the fascist in the bushgov into the offshore accounts of superrich, predator class.
    No one is helping the middle class. No one!!!

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  18. bangzoom14 says:

    Steve, those were excellent comments you made on this topic. This is as good a time as any to start a real discussion on the business practices of American corporations and the impact they have on the American economy, the workers, the environment and on the rest of the world. Maybe Obama can start the ball rolling.

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  19. Patrick says:

    my initial thought upon hearing about Citibank’s potential bankrupcy was, Yipee! this will cancel out the small fortune’s worth of debt I have stored up on my trusty Citi-card… right?

    Reply

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