Banking Games V

Banking Games V

This will be a short one folks. It’s more of a rant than an article. I don’t know why I am surprised when the banking industry pulls another rabbit out of an empty hat and sticks it to the American people, but here we go.

Banking Games V is an appropriate title since Citigroup’s stock will be below $5.00 for a while. The new offering will be priced at $3.15 a share which Citi will use to pay off the TARP program. That’s a good thing you say? Normally I would agree, I much prefer the stock world to be funded by investment dollars rather than tax payer dollars but in this case am I, as a tax payer, getting the shaft here? I mean my taxes helped them stay afloat during the financial crisis but with treasuries plan to sell their stake in the bank, Citi could use a part of the IRS code developed for corporate ownership changes to rake in a 38 billion dollar tax break! (See section 382 in tax code) So in essence, we funded them with our money to help them stay afloat under the too big to fail scenario and now we are going to miss out on tax revenue that we should have had because they know how to twist the tax code. Hey I’m all for ingenuity but come on big C. You owe the American people baby! I mean it’s sad enough that you are paying millions to your lobbyists to block any meaningful banking reform but now this? In essence you’re taking money from tax payers to pay back tax payers.

For the record, I’m normally against more regulation of business in a capitalistic society, but the banking industry is proving by still playing around with those same derivative time bombs that got us into this mess that they need more regulation. The problem with trying to get some regulation is that we give them a grace period before the new regulations go into place. How many of you got screwed with the new credit card regulations that went into effect? You found all sorts of account agreement changes in your mail box before they had to comply with the new rules. I guess I just chalk all this up as different ways to get “more share of wallet”*. I mean we all know that the Citi board will use the freedom from government restrictions on operations and pay to do the right things for the stock holder’s right? Right?!? The first time some officer gets a multi-million dollar bonus, since the pay restrictions will be removed with the TARP payoff, I think anybody that has an account there should close it and talk your friends and family into closing theirs also.

Until next time. Make good decisions not only in finance, but also in life.

* See original banking games for "more share of wallet" explanation.