Citigroup’s scam on the American public
June 24th, 2009 Categories: Real Estate News, San Diego county Real Estate News
SAN Diego- In a recent post here, I stated my case to end the foreclosure moratoriums and how those moratoriums are key to presenting a false picture of economic health on governmental and individual business levels.
In today’s San Diego Union Tribune, which I subscribe to, there is an article on page 4 of the business section titled ‘ Citigroup to increase worker compensation’. The subtitle is ‘ Pay raise would offset slim bonuses’. As I read the article, I could not help but feel insulted by how little these companies understand what’s happening to the average American. These financial institutions seem to operate any way they see fit for themselves and to hell with the rest of you as you won’t survive without us.
Here’s the deal. Because of the public outcry over bonuses, Citigroup is raising rank and file worker’s compensation as much as 50% in order to scale back on the value of bonuses. Now please note two things. First the potential number of employees affected is close to 300,000, so this is no small number, and they are doing this as PROFITS ARE UP and all is rosy in the financial sector. Really?
We the people, through the federal government own 34% of Citigroup and have contributed approximately 45 billion to their business through TARP money. The money has not been used to to help their troubled mortgages as designated in the TARP program, but has been used to write new loans primarily to municipal borrowers.
Citigroup said its committee overseeing the use of taxpayer money approved $44.75 billion in lending initiatives as of March 31. That is up from the $36.5 billion in lending initiatives announced in February, and now includes $5 billion in loans to municipalities.
The loans being offered by Citigroup to state and local governments, municipal agencies, universities and non-profit hospitals would not likely have been made had the bank not received money from the Troubled Assets Relief Program, or TARP.- blog.taragana.com, 5/12/2009
The good news they are writing new loans to secure borrowers so they in essence are protecting our investment. But the key component here is the positive impact on the balance sheets. But in order to keep those balance sheets looking good, what to do with those pesky distressed borrowers the money was SUPPOSE TO BE USED FOR? I know a MORATORIUM!!! And so begins the shell game we’ll call hide the bad assets.
Of the four biggest U.S. banks — Citigroup, JPMorgan Chase & Co., Bank of America Corp. and Wells Fargo & Co. — Citi has been on the shakiest footing as a result of the mortgage crisis, reporting losses in the past four consecutive quarters while its rivals have managed to post profits. The steps announced Monday are designed to stem those losses.
"Typically the lender loses the most money when a house goes into foreclosure," said Barry Zigas, director of housing policy at the Consumer Federation of America. "(The lender) takes some kind of loss that’s usually much greater than what they sacrificed through some kind of workout." *
The solution…… a MORATORIUM. Watch the shell to follow the ball?
Citigroup says it is imposing a moratorium on most foreclosures as part of a series of initiatives aimed at helping at-risk borrowers remain in their homes — making Citi the latest big bank to announce sweeping efforts to try to curtail losses from souring mortgages. *
However, the first moratorium period and now continuation of those moratoriums are only the the shells making their sweeping circles in order to confuse.
But a moratorium only solves so much, according to Zigas. "A moratorium on foreclosure will be effective at stopping foreclosure, it won’t be effective at stopping the underlying reasons of why people are in trouble," he said.
By taking a proactive approach, Citigroup isn’t waiting until it’s too late to deal with delinquent borrowers, said Steve Curnutte, president of InsBank Mortgage in Nashville, Tenn. However, the problem is growing faster than most banks can handle, he said.
"It’s nearly an insurmountable undertaking," said Curnutte. "The number of bad loans that they can modify using their resources is being quickly outstripped by the number of new loans that need to be modified."- /www.insidevandy.com, 11/11/2008 *
These “profitable” financial institutions are sitting on a powder keg smoking a cigarette trying to convince us everything is cool. And again, this is a continuation of the thought process that got us here in the first place. Ignore the true fundamentals, or in some mortgage cases don’t even ask, and hope that everything will be okay in the end. See the moratoriums are being used as way for banks not to book these losses and they are hoping they will bridge them to a rosier economic climate.
With approximately 55% of mortgages modified last year failing, we could say this plan isn’t working so well. Additionally, unemployment is nearing 11% and there are actually employees voting to decrease their compensation to save their and other’s jobs. A local example of this can be seen by the teachers of the Poway School District who agreed to a pay cut and to work fewer days. So, while it certainly is a good thing for the Citigroup employees, giving 50% pay raises in this false environment is ludicrous. Hire the qualified from the many that are willing to work for reasonable compensation.
Now, I feel for the families that would be displaced by foreclosure, but we need to purge these homes in order to get back a solid foundation to base a recovery on. Currently pricing and interest rates are making for a great real estate climate and the banks should be seizing on this opportunity. Or, there may have been a better solution that the government should have acted on earlier; become a lender. Read this great article by Neil Baron with USA Today and then ask yourself if there could have been a better use of our 12.8 trillion dollars given to business like Citigroup.
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