Citigroup: The Original Gangsta

500px-Citi.svgRobert Scheer writes at Truthdig:

Barack Obama’s Justice Department on Monday announced that Citigroup would pay $7 billion in fines, a move that will avoid a humiliating trial dealing with the seamy financial products the bank had marketed to an unsuspecting public, causing vast damage to the economy.

Citigroup is the too-big-to-fail bank that was allowed to form only when Bill Clinton signed legislation reversing the sensible restraints on Wall Street instituted by President Franklin Roosevelt to avoid another Great Depression.

Those filled with Clinton nostalgia these days might want to reflect back on how truly destructive was his legacy for hardworking people throughout the world who lost so much due to the financial shenanigans that he made legal.

“Today what we are doing is modernizing the financial services industry, tearing down those antiquated laws and granting banks significant new authority,” a beaming Clinton boasted after signing the Financial Services Modernization Act into law in 1999.

Called the Citigroup authorization act by some wags at the time, those antiquated laws, the Glass-Steagall Act primarily, had put a safety barrier between the high rollers in Wall Street investment firms and the staid commercial banks charged with preserving the savings of ordinary folk. The new law permitted them to merge.

Clinton handed the pen that he used in signing the new law to Citigroup Chairman Sanford Weill, whose Citicorp had already merged with Travelers Group before the law was even officially changed. On an earlier occasion, Weill had informed Clinton about his merger plans in a telephone conversation. After hanging up, Weill then bragged to his fellow banking executive John S. Reed, who was on the call, that “we just made the president of the United States an insider,” according to Wall Street Journal reporter Monica Langley in her book on the Citigroup merger.

In 2000, just before leaving office, Clinton went much further in radical deregulation of the financial industry when he signed the Commodity Futures Modernization Act. In one swoop this eliminated from the purview of any existing regulation or regulatory agency the new financial products, including the mortgage-backed securities at the heart of the financial meltdown and the subject of the $7 billion fine levied in what has to be viewed as a copout deal.

This is not just because the fine is paltry compared with the far greater damage Citigroup wreaked upon working Americans who lost so much but because, without a trial, there will be no public accountability of the cynicism that Citigroup’s leaders visited upon unknowing consumers.

That cynicism begins with Robert Rubin, who was selected from his leading position at Goldman Sachs to be Clinton’s Treasury secretary. It was Rubin who as much as anyone is responsible for pushing through the legislation that ended the effective regulation of Wall Street and made the merger of Travelers Group and Citicorp possible. Rubin was a darling of the mass media while in office, and the fawning adulation continued even as he moved through the revolving door and took a $15 million a year job with Citigroup, the megabank he had helped make legal. Rubin was at Citigroup during the years when it engaged in most of the practices involving subprime and other questionable mortgages that resulted in the fines the bank must now pay.

Rubin’s deputy in the Treasury Department, Larry Summers, who replaced him for the last years of the Clinton administration, was particularly important in pushing through the legislation that freed Collateralized Debt Obligations from any regulation. Summers worked to silence Brooksley Born, the heroically prescient chair of the Commodity Futures Trading Commission who had warned of the dangers posed by unregulated CDOs. Her reward for such insight was to be denied reappointment by Clinton and denounced by Summers.

Summers set the gold standard for out-of-touch stupidity when he testified before a Senate committee that the “largely sophisticated financial institutions” were “capable of protecting themselves from fraud and counterparty insolvencies,” and “given the nature of the underlying assets involved—namely supplies of financial exchange and other financial interest—there would be little scope for market manipulation.”

Summers later made $8 million in 2008 in speaking fees from Citigroup and other banks and consulting for a hedge fund before being tapped by Obama to be his top economic adviser. Summers was instrumental in guiding the Obama administration’s efforts to keep the bankers whole while largely ignoring the fate of their victims.

Read more here.

22 Comments on "Citigroup: The Original Gangsta"

  1. Liam_McGonagle | Jul 17, 2014 at 3:50 pm |

    Haters always be trying to bring down the successful. It’s called jail-lousey.

  2. emperorreagan | Jul 17, 2014 at 4:21 pm |

    It’s hard to pick which president who has been in office during my lifetime I hate the most…

    Reagan, Bush I, Clinton, Bush II, Obama?

    I caught the tail end of Carter’s presidency, so he wins least hated.

    Here’s my gut ranking as of right now (least to most hated):

    6. Carter
    5. Bush I
    4. Bush II
    3. Obama
    2. Reagan
    1. Clinton

    I guess I hate Obama more than Bush II at this point for expanding on the parts of Bush II that I considered the worst. Plus I expected Bush II to be a shit president, so I wasn’t terribly surprised when he fulfilled his promise. I didn’t expect Obama to be as shit as he has been.

    Clinton wins for most hated for deregulating finance, NAFTA, popularizing the phrase “grow the economy”, blowing the chance to pull back/downsize the military instead of going on half-assed military adventures like bombing a pharmaceutical plant…

    Maybe I should still hate Reagan the most though, because it’s been almost like having Reagan I, Reagan II, Reagan III, Reagan IV, and Reagan V. He’s the blueprint for shit.

    • BuzzCoastin | Jul 17, 2014 at 5:35 pm |

      why hate puppets?
      why hate the effects of something bigger than they?
      it is an effect of electric money to inflate everything it touches
      and money in general renders one blind to hypocrisy
      the way of Duh Homeland is the unrestricted flow of money
      and Katie bar the door

      • emperorreagan | Jul 18, 2014 at 12:16 am |

        Some people like sports. I listen to C-SPAN radio and root against everyone.

      • Why not hate puppets for being puppets? They made that choice.

        • BuzzCoastin | Jul 18, 2014 at 1:06 am |

          at best
          they’re victums of circumstances
          stumbling into the hotseat by luck
          and swept up in the forward motion of electric money
          that was already full throatle
          when they were placed in postion of chief fall guy
          Hell to the chiefs

          • “Victims of circumstances” are people caught in war or victims by some disease or something else beyond their control. When these people make the decision to become a puppet in support of their own blind ambition, it is just that a choice. Once elected, they have the choice to continue to be a puppet or deviate from their chosen/trapped path.

    • Liam_McGonagle | Jul 18, 2014 at 12:02 pm |

      Not to muddy the waters, but:

      Maybe it’s the American people we should hate most. We’re enablers.

      • Don’t blame the victims. It’s not our fault that we are constantly given only two choices: bad or worse, depending on your political inclinations. That started long before any of us were born. See Edward Bernays “Propaganda,” 1928.

      • emperorreagan | Jul 18, 2014 at 2:39 pm |

        Maybe. But one thing governments have long been good at is misdirection.

        Governments, and those that truly direct the government, are always the #1 adversary of the people who live under them. Sometimes people forget that.

      • esaucarin93 | Jul 19, 2014 at 8:30 am |

        Please speak for yourself.

      • Echar Lailoken | Jul 19, 2014 at 7:44 pm |

        Buzz’s propaganda must be getting to you.

    • Maybe I should still hate Reagan the most though because it’s been almost like having Reagan I, Reagan II, Reagan III, Reagan IV, and Reagan V. He’s the blueprint for shit.

      To The Latter:

      Well, consider that Reagan restored, in some sense, American Exceptionalism℠ as if the previous two decades of turbulence were some sort of aberration best forgotten. He’s the prototypical blank slate actor to put in front of a camera and ask for your vote. It is the well-scripted emotional appeal, executed to a level never previously thought possible, live from Hollywood, now selling you Politrix Direct™.

      However, I would propose that there is only Reagan 1.0 and Reagan 2.0.

      Reagan 1.0 (and its iterants) appealed to The Silent Majority™ aka White™ people. These years are marked by the rebuilding of the White™ brand name. Witness the success of Reagan 1.2 in being considered “the first black president”®.

      Reagan 2.0 became a necessity purely due to demographic change. American Exceptionalism℠ had matured in the US, now it was time to recruit overseas. Rebranding for a globalized world.

      To The Former:

      I know where you’re coming from on this, because I spent many years hating presidents, politicians, etc. Indeed, many justifiably incur hatred. However, I have (relatively recently) come to the understanding that maintaining that hatred simply isn’t worth it. For a number of reasons, but probably the most practical in not wasting your energy.

      And if you happen to believe their’s a psychic vampirism or some other such occult nonsense to the magic bead game, there’s a much better response: let it go and turn it off.

      So far, it seems to be the most revolutionary activity that I can carry out right here right now most effectively.

      However if that’s not enough, recast your gaze from Big Politics™ to local politics: town, city & county. It’s generally much easier to grassroots and much more difficult to astroturf.

      • emperorreagan | Jul 20, 2014 at 8:13 pm |

        I agree with both of your points.

        My use of “hate” now is really different than it was in my teens and early 20s. When I said I hated something then, there was emotional investment in it.

        I use “hate” pretty flippantly these days. I pay as much attention as I find amusing and cut it off when I start to feel any twinge of actual anger or engagement to politics.

        The change I’d like to see in the world isn’t going to come from any sort of top-down organization and expecting anything other than, at best, mis-guided paternalism is a fool’s game.

  3. Yes, but those billions of dollars will better enable the justice department to prosecute dangerous criminals who aren’t rich enough to buy them off. Greater good…or something.

    • BuzzCoastin | Jul 17, 2014 at 5:26 pm |

      don’t worry
      they’ll never pay the fine
      they’ll borrow the fine from the FED at 0%

  4. BuzzCoastin | Jul 17, 2014 at 5:23 pm |

    “It is difficult to get a man to understand something when his salary depends upon his not understanding it.” – Upton Sinclair

    “We don’t see very far in the future, we are very focused on one idea at a time, one problem at a time, and all these are incompatible with rationality as economic theory assumes it.”
    – Daniel Kahneman, Nobel Laureate in Economics, 2002;

  5. DrDavidKelly | Jul 17, 2014 at 10:06 pm |

    Happy with my own little victory against Citibank. Bprrowed money from them … about 10k and never paid it back. Just didnt pay and waited until the statute of limitations kicked in. Fuckers I know it didnt mean anything to them but these pricks are evil.

    • BuzzCoastin | Jul 18, 2014 at 12:59 am |

      they planned on about 5% of borrowers not paying
      at 0% interest cost & 30% interest charged
      leaves a lot of room for profitable nonpayers

      • DrDavidKelly | Jul 18, 2014 at 3:15 am |

        I did it to a few banks … ruined my credit rating but after 7 or so years it’s all wiped. I’m loathed to go into debit anyway so screw ’em all. Banks are hideous. Once upon a time usury was punishable by death. Now it’s applauded.

        • BuzzCoastin | Jul 18, 2014 at 3:50 am |

          they lent you nothing
          you paid them nothing
          hundreds of people made a living from this nothing
          doing nothing
          you enjoyed some benefit
          as did hundreds of others
          Great job!

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