Thursday, April 1, 2010


Well yea its a profit, umm if you don't really count the expenses, well and technically we generated the revenue by loaning them free money and then paying to borrow it back. Oh, and we exempted them from paying taxes. But hey, whoohoo, the Financial gurus say its good news and they are never wrong. Right?

The Wall Street Journal stated that the American taxpayer stands to make a tidy 8 billion dollar profit on the sale of the Citibank stock the government received during the great bail out. This is hilarious and I might add it shows that the level of intelligence that led us into this mess has not improved in the interim. There are two options – either the vast majority of financial professionals are congenital idiots or they are pathological liars. Either choice is bad and frankly I think both are possible. It is this sad combination of conspiracy and incompetence that has led to the American meltdown. But for the sake of internal logic within this posting, I will assume choice number one – idiocy.

First off let’s define profit – last time I looked it was the excess of income over expense. So, after we sell off our Citibank shares will we really earn 8 billion more than we spent? Of course, it is very hard to tell how much we spend in the first place to acquire the shares, the numbers are not compiled coherently and everyone reports differing amounts. The best number from the TARP people is that we tossed them 25 billion.

But this was just the cash we gave. It does not seem to include the value of guaranteeing 300 billion in bad assets for Citibank. We received 7 billion in stock for that that – seems like that’s a loss to me. Nor do we take into account that we have been tossing working cash to the banks at practically zero percent interest. Banks operate by renting money in at a low rate and then renting it out at a higher rate. The taxpayers let them borrow at 0 percent and then pay the bank almost 5 percent on US treasury bonds. That is a tidy 5 percent profit with no cost to them and no risk, 5 percent is very high rate of real return in historic terms, it is also requires no work. The trade is all between Citibank and the Federal Reserve. Therefore the economy receives no benefit – no houses are bought, no business loans made so no impact on the economy at large. The profits stay neatly under the thumb of the tight little group of board members that populate most of the biggest corporations in the world.

Oh and of course, we are going to pay one of the very institutions we bailed out to broker this deal. I wonder if Morgan Stanley will give us a discount rate for the 10 billion dollars they received. It just gets funnier and funnier.

But best yet – we will make (if we do) this 7 to 8 billion profit from the sale of stock we bought only after the cretins who run Citibank and their fellow financial “professionals” had driven their stock price down from over 50 dollars a share to less than 3$. In the meantime their shenanigans cost the America public over in market value as they whole stock market collapsed under the weight of their schemes losing over 1.2 trillion dollars in a single day, over 8.5 trillion in a year.

So to review, the same geniuses who got us into this mess are now telling us that we are going to make 8 billion on the sale of some stock we got from Citibank. Great return, all it cost us was:

1) Paying 25,000,000,000 dollars in upfront cash

2) Unlimited free money to them which we borrow back at over 4% a year

3) Backing every stupid investment the banks made with our check book

4) Losing 8,500,000,000,000 dollars in 2008 so that in 2010 we could sell some stock at an 8,000,000,000 profit. (Seems like we dropped off three whole zeros in the process, but who's counting.)

As far as I can see the Wall Street Journal’s statement works like this. (I will drop off 9 zeros so the numbers can be grasped by us poor slobs.) You go into a casino and start jumping for joy when you hit an $8 jackpot on the nickel slots. This is great as long as you ignore the $25 cover fee to get in the casino or that you just lost $8,500 on the blackjack table. Oh and don’t forget you have to tip the staff for the privilege of giving them your money. Then there is the Taxman to talk to.

Oh hell, I forgot, the US government also gave Citibank and several others billions in tax exemptions. Of course, the government is not reducing spending it is increasing it to bail out more corporations. So if the banks don’t pay any taxes, then it’s up to us to pay the difference. Wow, this isn’t any fun anymore.

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