Today the government became the single largest shareholder in the epitome of failure (read: Citibank). The government used our money to go from an 8% shareholder in the company to controlling 36% of the company's stock. So one would think that the government would toss the executives who ruined the company and replace them, but instead the head of Citigroup, Vikram S. Pandit, will stay while the board of the company is "shaken up." It's sad - pathetic may be a better word - when the government might be better at running a multi-billion dollar enterprise such as this, but Citigroup may have reached that pantheonic low at this point. If $45 billion of free government money can't keep you afloat, maybe it's time to go the way of Jack Dawson because Rose, like the government, can't hold on to you forever.
But the deal with Citi is dependant on one factor: private investment. If there is no interest from the private sector, the government may not go forward with its conversion plan. However, there is a worrisome aspect of those private sector investments. Most of those private investors are foreign governments, like the governments of Saudi Arabia and Singapore, so if Citi does indeed recover, it will be foreign governments that profit along with the other investors. This on top of the fact that Secretary of State Clinton recently let China - the biggest foreign holder of U.S. debt - know that "our economies are so intertwined...we are truly going to rise or fall together." So in a way the banks and other companies that our government is pouring money into are not nationalized; they are really multi-nationalized because we are borrowing money from foreign governments to, as the Washington Post says, "finance the spending binge the United States went on before the current economic crisis."
It's bad enough that the government is nationalizing these banks - and make no mistake, when the government becomes the largest shareholder in a company, that company has been nationalized. The government can swear up and down that it will make no policy decisions, blah blah, but the reality remains: it has provided the company with provisions it must meet (one of which is the shake up the board) and now has a serious interest in it. What's worse is that we are borrowing money from foreign governments (governments who commit serious human rights abuses, to boot) in order to do all of this. Future foreign policy negotiations with these countries should be interesting, to say the least. For America's sake (both domestically and on the international stage) let's hope Citi recovers and the government can manage it a bit better than its overpaid executives. Peace.
Photos - Citibank logo (Consumerist), Pandit (International Herald Tribune)