“All financials will be owned by the U.S. government in a year, I bet you.”
Under the deceptive New York Times headline U.S. Approves Plan to Help Citigroup Cope With Losses, we read about this fun addition to the federal government gravy train:
U.S. government regulators were nearing approval of a radical plan to stabilize Citigroup on Sunday in which the government would soak up tens of billions of dollars in losses at the struggling bank, according to people briefed on the discussions.
The plan … would mark the government’s third effort in as many months to contain the deepening economic crisis. While the negotiations were in flux on Sunday night, the proposal, if applied to other banks, could set the precedent for other multibillion-dollar financial rescues…
…The plan could herald another shift in the government’s morphing financial rescue. The Treasury Department initially proposed buying troubled assets from banks but then reversed course and began injecting capital directly into financial institutions. Neither plan, however, restored investors’ confidence for long.
…It was unclear on Sunday night exactly how [or if???] the Citigroup arrangement might work. … Citigroup has already received $25 billion under the initial rescue plan…
Then, late Sunday night, Michelle Malkin sounds this alarm:
[11/24/08] 1:00 am Eastern update: Here we go, folks. The Treasury Dept/FDIC/Federal Reserve have issued their late-night joint statement announcing $306 billion in federal backing for Citicorp plus $20 billion of the Crap Sandwich [the $700 billion bailout] (that’s on top of the $25 billion bite they’ve already taken):
The following is the text of a statement on Citigroup released jointly by the U.S. Treasury Department, Federal Reserve and Federal Deposit Insurance Corp on Sunday [11/23/08]:
The U.S. government is committed to supporting financial market stability, which is a prerequisite to restoring vigorous economic growth. In support of this commitment, the U.S. government on Sunday entered into an agreement with Citigroup to provide a package of guarantees, liquidity access and capital.
As part of the agreement, Treasury and the Federal Deposit Insurance Corporation will provide protection against the possibility of unusually large losses on an asset pool of approximately $306 billion of loans and securities backed by residential and commercial real estate and other such assets, which will remain on Citigroup’s balance sheet. As a fee for this arrangement, Citigroup will issue preferred shares to the Treasury and FDIC. In addition and if necessary, the Federal Reserve stands ready to backstop residual risk in the asset pool through a non-recourse loan.
In addition, Treasury will invest $20 billion in Citigroup from the Troubled Asset Relief Program in exchange for preferred stock with an 8% dividend to the Treasury. Citigroup will comply with enhanced executive compensation restrictions and implement the FDIC’s mortgage modification program.
With these transactions, the U.S. government is taking the actions necessary to strengthen the financial system and protect U.S. taxpayers and the U.S. economy.
- We will work to support a healthy resumption of credit flows to households and businesses.
- We will exercise prudent stewardship of taxpayer resources.
- We will carefully circumscribe the involvement of government in the financial sector.
- We will bolster the efforts of financial institutions to attract private capital.
We will continue to use all of our resources to preserve the strength of our banking institutions and promote the process of repair and recovery and to manage risks. The following principles guide our efforts:
Contact your congressmen.
Reps here.
Senators here.
U.S. Senator James Inhofe (OK-R) has proposed a bill to rollback the $700 billion bailout. Senate Bill S3683. Urge your representatives to support this bill.
