The Rise and Fall of Citigroup


Citigroup’s two best known ad campaigns, “Citi Never Sleeps” and “Live Richly,” will hopefully become a cautionary warning for the next generation: don’t take advice from sleep-deprived money managers and live within your means. As of last Friday’s close, Citigroup had $2 trillion in “assets” and $20.5 billion in stock market value, strongly suggesting the term “assets” is a misnomer on Wall Street. Late last night the U.S. government agreed to dump hundreds of billions more into this black hole without any survival plan required of the company as demanded of the auto makers: apparently if you make those four wheel machines that get us to work you’re suspect; if you manufacture losses in unintelligible derivatives, you’re good to go.

Citigroup’s five-day death spiral last week was surreal. I know 20-something  newlyweds who have better financial backup plans than this global banking giant.  On Monday came the Town Hall meeting with employees to announce the sacking of 52,000 workers.  (Aren’t Town Hall meetings supposed to instill confidence?)  On Tuesday came the announcement of Citigroup losing 53 per cent of an internal hedge fund’s money in a month and bringing $17 billion of assets that had been hiding out in the Cayman Islands back onto its balance sheet.  Wednesday brought the cheery news that a law firm was alleging that Citigroup peddled something called the MAT Five Fund as “safe” and “secure” only to watch it lose 80 per cent of its value. On Thursday, Saudi Prince Walid bin Talal, from that visionary country that won’t let women drive cars, stepped forward to reassure us that Citigroup is “undervalued” and he was buying more shares. Not having any Princes of our own, we tend to associate them with fairytales. The next day the stock dropped another 20 percent with 1.02 billion shares changing hands. It closed at $3.77.

Altogether, the stock lost 60 per cent last week and 87 percent this year.  The company’s market value has now fallen from more than $250 billion in 2006 to $20.5 billion on Friday, November 21, 2008.  That’s $4.5 billion less than Citigroup owes taxpayers from the U.S. Treasury’s bailout program.

Also rounding out the week’s news on Friday was the revelation that after receiving $25 billion of taxpayer money, Citigroup would continue to honor its $400 million, 20-year commitment and pay out an installment of $20 million to have the new Mets’ baseball stadium named Citi Field.  (Flashback: April 7, 1999: Enron agrees to pay more than $100 million over 30 years to name a Houston stadium Enron Field.)

It took the repeal of the Glass-Steagall Act, legislation crafted after the 1929 crash barring commercial banks from merging with their casino cousins (investment banks and brokerage firms) to bring Citigroup to life.

Sandy Weill took Travelers Insurance, the Smith Barney brokerage firm (which had been combined with the Shearson brokerage firm), the investment bank Salomon Brothers and announced on April 6, 1998 that he would be merging all of these units with the commercial banking giant, Citicorp, owner of Citibank.  Never one to let laws get in his way, Mr. Weill announced this deal despite the fact that this combination was not allowed at the time because of the Glass-Steagall Act.

It would take “a village” in the Clinton administration to get Glass-Steagall repealed and allow the creation of the colossal financial monster that would take precisely one decade to pay its founder $1 billion and then implode in a sea of losses.  The village included Treasury Secretary Robert Rubin who successfully lobbied for the repeal of the investor-protection law, then left his cabinet position in the Clinton administration and moved his game marker to the Board of Citigroup 17 days before the bill gutting Glass-Steagall was signed into law on November 12, 1999.   Mr. Rubin would collect over $150 million from Citigroup in the next 9 years for his Board service, without ever drawing the go-to-jail card; not even when he picked up the phone and called a Treasury official and asked the government to stop the credit rating agencies from downgrading the debt of Enron, to whom Citigroup had major exposure.  In that one instance, he was rebuffed.

And, of course, the village included Alan Greenspan who rarely saw an investor-protection regulation to which he didn’t proceed to take a machete. Now, after 19 years of making the country listen to his mutterings before Congress in verbose, convoluted  academic-speak; after he has assisted handily in turning Wall Street into the Dollar Store and once thriving companies into a barren wasteland of receiverships, bankruptcies and collapsing stock prices, he offers a broken country a one-liner: he got it wrong.

The Federal Reserve held hearings on the proposed merger of Citigroup on June 25 and June 26, 1998, at the Federal Reserve Bank of New York.  Galen Sherwin, then President of the National Organization for Women in New York City, and I were protesting outside the hearings on June 26 over Mr. Weill’s enforcement of private justice systems for his workers.  Employees had to sign away their rights to sue the firm in court as a condition of employment and agree to secret tribunals called mandatory arbitration.  We were holding very large and graphic protest signs when a kindly official came out and asked if we would like to testify on a panel where they had a few openings.  Somewhat surprised by the invitation (perhaps it was to provide an unobstructed photo shot of the Fed Building for tourists), we seated ourselves in the auditorium and began to feverishly scribble our speeches on scrap paper. The Federal Reserve has maintained the original of my scribbled text on its web site all these years and I printed it out today as a sorrowful souvenir of our country’s decade-long incarceration under corporate rule.

With our protests signs propped against the testifiers’ table and a Fed employee in a back area filming it all for posterity, here’s an excerpt of what I told the Fed on June 26, 1998:

“It is amazing how soon we forget.  It was just 60 years ago that 4,835 of America’s banks went broke and closed their doors, leaving shareholders and depositors destitute.  The underlying reason that this happened was the lack of moral courage by our regulators and elected representatives to just say no to powerful money interests.  Instead of just saying no, Washington handed the banks the equivalent of an ATM card to the Feds discount window to speculate in stocks.

At a time when Japan, the second largest industrialized nation, is reliving the 1930s in America, complete with banking insolvency, it is amazing and preposterous that we should be discussing rolling back Glass-Steagall.

We also want to remember that the political dynamics that created the backdrop for the banking meltdown in the ‘30s grew from a corrupt cozy culture between Wall Street and Washington.  U.S. Supreme Court Justice William O. Douglas, (who knew a thing or two about the matter, having just served as chairman of the young, new SEC, before he went to the Supreme Court) called it what it was, chicanery and corruption.

Frank Vanderlip, coincidentally, an actual former president of National Citibank, wrote in the Saturday Evening Post at the time that lack of separation of banking and securities contributed to the stock market losing 90 per cent – I’d like to repeat that, 90 per cent – of its value from 1929 to 1933.   The public was so sickened by the hubris and corruption that an entire generation stayed away from the stock market.  It was not until 1954, 25 years later, that Wall Street once again reached the level it had set in 1929.

There is a compelling body of evidence that suggests a corrupt cozy culture has once again enveloped the brains of Washington.  We can hardly look to the safe keepers of the public trust when they are falling over themselves to reap campaign windfalls from Wall Street.”

Like any other epic tragedy resulting from human hubris, this one deserves reflection and analysis if we are to claw our way out of the abyss.  Offered in solidarity with anthropologist Gregory Bateson’s theories on creating levels of learning, and anthropologist  Laura Nader’s cautions on keeping anger in a box, below are links to the unfolding crisis and Citigroup’s pivotal role as filed here at CounterPunch beginning on  November 6, 2007.

November 6, 2007
Wall Street Metes Out Street Justice to Citigroup

November 28, 2007
Crashing Citigroup

January 3, 2008
The Free Market Myth Dissolves Into Chaos

January 21, 2008
How Wall Street Blew Itself Up

February 2/3, 2008
Bankers Gone Bonkers: Global Finance and the Insanity Defense

March 17, 2008
Too Big to Bail: The Fed’s Wall Street Dilemma

June 21/22, 2008
A Secret Oil Gusher Inside Citigroup

September 20/21, 2008
The Wall Street Model: Unintelligent Design

October 17/20, 2008
How the Banksters Are Making a Killing Off the Bailout

PAM MARTENS worked on Wall Street for 21 years; she has no security position, long or short, in any company mentioned in this article.  She writes on public interest issues from New Hampshire.  She can be reached at pamk741@aol.com





Pam Martens has been a contributing writer at CounterPunch since 2006. Martens writes regularly on finance at www.WallStreetOnParade.com.

October 06, 2015
Vijay Prashad
Afghanistan, the Terrible War: Money for Nothing
Mike Whitney
How Putin will Win in Syria
Paul Street
Yes, There is an Imperialist Ruling Class
Paul Craig Roberts
American Vice
W. T. Whitney
Why is the US Government Persecuting IFCO/Pastors for Peace Humanitarian Organization?
Kathy Kelly
Bombing Hospitals: 22 People Killed by US Airstrike on Doctors Without Borders Hospital in Kunduz, Afghanistan
Murray Dobbin
Rise Up, Precariat! Cheap Labour is Over
Ron Jacobs
Patti Smith and the Beauty of Memory
David Macaray
Coal Executive Finally Brought Up on Criminal Charges
Norman Pollack
Cold War Rhetoric: The Kept Intelligentsia
Roger Annis
The Canadian Election and the Global Climate Crisis
October 05, 2015
Michael Hudson
Parasites in the Body Economic: the Disasters of Neoliberalism
Patrick Cockburn
Why We Should Welcome Russia’s Entry Into Syrian War
Kristine Mattis
GMO Propaganda and the Sociology of Science
Heidi Morrison
Well-Intentioned Islamophobia
Ralph Nader
Monsanto and Its Promoters vs. Freedom of Information
Arturo Desimone
Retro-Colonialism: the Exportation of Austerity as War By Other Means
Robert M. Nelson
Noted Argentine Chemist Warns of Climate Disaster
Matt Peppe
Misrepresentation of the Colombian Conflict
Barbara Dorris
Pope Sympathizes More with Bishops, Less with Victims
Clancy Sigal
I’m Not a Scientologist, But I Wish TV Shrinks Would Just Shut Up
Chris Zinda
Get Outta’ Dodge: the State of the Constitution Down in Dixie
Eileen Applebaum
Family and Medical Leave Insurance, Not Tax Credits, Will Help Families
Pierre-Damien Mvuyekure
“Boxing on Paper” for the Nation of Islam, Black Nationalism, and the Black Athlete: a Review of “The Complete Muhammad Ali” by Ishmael Reed
Lawrence Ware
Michael Vick and the Hypocrisy of NFL Fans
Gary Corseri - Charles Orloski
Poets’ Talk: Pope Francis, Masilo, Marc Beaudin, et. al.
Weekend Edition
October 2-4, 2015
Henry Giroux
Murder, USA: Why Politicians Have Blood on Their Hands
Mike Whitney
Putin’s Lightning War in Syria
Jennifer Loewenstein
Heading Toward a Collision: Syria, Saudi Arabia and Regional Proxy Wars
John Pilger
Wikileaks vs. the Empire: the Revolutionary Act of Telling the Truth
Gary Leupp
A Useful Prep-Sheet on Syria for Media Propagandists
Jeffrey St. Clair
Pesticides, Neoliberalism and the Politics of Acceptable Death
Lawrence Ware – Paul Buhle
Insurrectional Black Power: CLR James on Race and Class
Joshua Frank
The Need to Oppose All Foreign Intervention in Syria
Oliver Tickell
Jeremy Corbyn’s Heroic Refusal to be a Nuclear Mass Murderer
Helen Yaffe
Che’s Economist: Remembering Jorge Risquet
Mark Hand
‘Rape Rooms’: How West Virginia Women Paid Off Coal Company Debts
Michael Welton
Junior Partner of Empire: Why Canada’s Foreign Policy Isn’t What You Think
Yves Engler
War Crimes in the Dark: Inside Canada’s Special Forces
Arno J. Mayer
Israel: the Wages of Hubris and Violence
W. T. Whitney
Cuban Government Describes Devastating Effects of U. S. Economic Blockade
Brian Cloughley
The US-NATO Alliance Destroyed Libya, Where Next?
Barry Lando
Syria: Obama’s Bay of Pigs?
Karl Grossman
The Politics of Lyme Disease
Andre Vltchek
Southeast Asia “Forgets” About Western Terror