by Daryl Montgomery
12/21/09
Citibank is planning on paying back $20 billion of the $45 billion in TARP funds that it received last year. In exchange for the $20 billion in repayment, the U.S. government is giving it $38 billion in tax credits. So of course Citi is actually receiving an additional $18 billion in bailout money, but this is being delivered indirectly and not through an official bailout program. For once, and this happens only on the rarest of occasions, one of the U.S. governments behind the scenes funding scams has been revealed. Investors should assume that this is only the tip of a very huge iceberg that includes changes in accounting rules that have allowed the big banks to unjustifiably report rosy income numbers, off-balance sheet items in the federal budget, slight of hand reporting of who is actually buying U.S. treasuries, and doctored government economic statistics.
Citi's motivation for paying back the $20 billion of TARP funding is to remove executive pay limits imposed on TARP recipients. To make it happen, American taxpayers will have to pay higher taxes to make up for the lost $38 billion in government revenue and have less disposable income so rich Wall Street bankers can get higher salaries. The other $25 billion Citi received from the government doesn't count for the pay restrictions because it was converted to a 34% equity stake in the bank. Citi is a partially nationalized company. Citi is issuing new stock at $3.15 to pay off the $20 billion and this is therefore diluting the equity stake of existing shareholders. The stock offering was poorly received however. This is not surprising. What is surpising is that anyone would buy it. Citi traded as low as 97 cents last year, a price level the U.S. market reserves for impending bankruptcies.
The Federal Reserve said in its post-meeting statement on December 16th that it expects to wind down several emergency lending programs that are set to expire next year. TARP was supposed to expire this year, but it was extended another year when the time came. Even if the programs are closed down, the recent Citi incident indicates that the bailouts won't be reduced, but merely shifted elsewhere in the hopes of misleading the public about what is really going on.
Fed chair Bernanke said last month that " we'll be showing the taxpayers fairly significant extra income" when discussing the bailout programs (read that statement very carefully). What he meant was that money would be showing up on the Fed's books. He didn't claim that the taxpayers would be receiving those gains. It should be kept in mind that the Fed is only a quasi-governmental organization (claims that is completely private are overstatements). The Fed was funded by the big U.S. banks originally, who still hold stock in it and have seats on its regional boards of directors. These banks receive yearly dividend payments from the Fed for their investments. If the Fed is making money, the big banks will be the beneficiary, not the American public.
Bernanke failed to see the Credit Crisis coming and then when it blew up, he used it as an opportunity for a Fed power grab and a chance to loot the U.S. Treasury and transfer taxpayer money to Wall Street firms. This sterling record has caused Time Magazine to just name him person of the year. Bernanke joins previous illustrious winners, such as Adolf Hitler (1938) and Joseph Stalin (1939 and 1942). The notice of the award was conveniently released the day before the U.S. senate banking committee was to vote on Bernanke's reconfirmation. Bernanke was of course confirmed by the panel.
Disclosure: No positions in Citibank.
Daryl Montgomery
Citi's motivation for paying back the $20 billion of TARP funding is to remove executive pay limits imposed on TARP recipients. To make it happen, American taxpayers will have to pay higher taxes to make up for the lost $38 billion in government revenue and have less disposable income so rich Wall Street bankers can get higher salaries. The other $25 billion Citi received from the government doesn't count for the pay restrictions because it was converted to a 34% equity stake in the bank. Citi is a partially nationalized company. Citi is issuing new stock at $3.15 to pay off the $20 billion and this is therefore diluting the equity stake of existing shareholders. The stock offering was poorly received however. This is not surprising. What is surpising is that anyone would buy it. Citi traded as low as 97 cents last year, a price level the U.S. market reserves for impending bankruptcies.
The Federal Reserve said in its post-meeting statement on December 16th that it expects to wind down several emergency lending programs that are set to expire next year. TARP was supposed to expire this year, but it was extended another year when the time came. Even if the programs are closed down, the recent Citi incident indicates that the bailouts won't be reduced, but merely shifted elsewhere in the hopes of misleading the public about what is really going on.
Fed chair Bernanke said last month that " we'll be showing the taxpayers fairly significant extra income" when discussing the bailout programs (read that statement very carefully). What he meant was that money would be showing up on the Fed's books. He didn't claim that the taxpayers would be receiving those gains. It should be kept in mind that the Fed is only a quasi-governmental organization (claims that is completely private are overstatements). The Fed was funded by the big U.S. banks originally, who still hold stock in it and have seats on its regional boards of directors. These banks receive yearly dividend payments from the Fed for their investments. If the Fed is making money, the big banks will be the beneficiary, not the American public.
Bernanke failed to see the Credit Crisis coming and then when it blew up, he used it as an opportunity for a Fed power grab and a chance to loot the U.S. Treasury and transfer taxpayer money to Wall Street firms. This sterling record has caused Time Magazine to just name him person of the year. Bernanke joins previous illustrious winners, such as Adolf Hitler (1938) and Joseph Stalin (1939 and 1942). The notice of the award was conveniently released the day before the U.S. senate banking committee was to vote on Bernanke's reconfirmation. Bernanke was of course confirmed by the panel.
Disclosure: No positions in Citibank.
Daryl Montgomery
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| ON THE MONEY... |
| .0. |
Nancy Myers: You’re known for bringing touches of Europe into homes. What part of Europe
are you originally from?
Inessa Stewart: I was born and spent my youth in Odessa on the Black Sea, now a major city
in the Ukraine. The city was founded by Catherine the Great and was designed to emulate
the great cities of Europe, most notably Paris. I was fortunate to grow up in such a classic
environment, where my education in art and antiques could flourish. After the city was
founded over two centuries ago, the first three governors of Odessa were French aristocrats
who found a safe haven from the French Revolution. Catherine the Great’s vision was,
therefore, realized in the architecture and design of the city.
NM: What inspired you to start your antiques business here, and how have your stateside
clients responded to these enduring collections?
IS: After about a decade in the U.S., I began to realize that I missed the history and
surroundings of my youth, which prompted me to begin the business in French and Italian
antique furniture so I could recreate the ambiance of classic European design and style. We
started with a small but elegant boutique and have expanded from that beginning to
55,000 square feet in three showrooms [Dallas, Plano, and Baton Rouge] in two states. We
could not have accomplished that growth without our loyal clients heartily embracing our
offerings.
NM: How frequently do you travel overseas these days?
IS: John [Stewart] and I travel to Europe as often as we can because we are the sole
buyers. Since we carry such a wide diversity of antiques, primarily Italian and French, we
have to cover a wide territory each trip. Even so, we insist on hand-selecting each and
every item. This has been our hallmark, and is the reason our antiques are so consistently
high in quality—our personal involvement in every inventory decision. We’re also proud
of the fact that we offer the most diverse collection in the business, with styles ranging all
over the spectrum, from multiple countries on the Continent. We are perfect for the purist or
the eclectic, and everything in between.
Text by Nancy Myers |
Photography by John Stewart in between.
www.inessa.com
are you originally from?
Inessa Stewart: I was born and spent my youth in Odessa on the Black Sea, now a major city
in the Ukraine. The city was founded by Catherine the Great and was designed to emulate
the great cities of Europe, most notably Paris. I was fortunate to grow up in such a classic
environment, where my education in art and antiques could flourish. After the city was
founded over two centuries ago, the first three governors of Odessa were French aristocrats
who found a safe haven from the French Revolution. Catherine the Great’s vision was,
therefore, realized in the architecture and design of the city.
NM: What inspired you to start your antiques business here, and how have your stateside
clients responded to these enduring collections?
IS: After about a decade in the U.S., I began to realize that I missed the history and
surroundings of my youth, which prompted me to begin the business in French and Italian
antique furniture so I could recreate the ambiance of classic European design and style. We
started with a small but elegant boutique and have expanded from that beginning to
55,000 square feet in three showrooms [Dallas, Plano, and Baton Rouge] in two states. We
could not have accomplished that growth without our loyal clients heartily embracing our
offerings.
NM: How frequently do you travel overseas these days?
IS: John [Stewart] and I travel to Europe as often as we can because we are the sole
buyers. Since we carry such a wide diversity of antiques, primarily Italian and French, we
have to cover a wide territory each trip. Even so, we insist on hand-selecting each and
every item. This has been our hallmark, and is the reason our antiques are so consistently
high in quality—our personal involvement in every inventory decision. We’re also proud
of the fact that we offer the most diverse collection in the business, with styles ranging all
over the spectrum, from multiple countries on the Continent. We are perfect for the purist or
the eclectic, and everything in between.
Text by Nancy Myers |
Photography by John Stewart in between.
www.inessa.com
| International treasure Inessa Stewart cultivates historic imports, timeless styles, and a loyal following, both at home and abroad. |
Real e Luxury
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