Citigroup bailout blackout: Network news programs featured no one asserting deal is bad for taxpayers
SUMMARY: On all three network evening news programs, reports on the bailout of Citigroup included interviews with supporters of the deal, but only the CBS Evening News included any criticism of the bailout -- and that criticism came from a source who argued that the bailout was not large enough. None of the reports featured criticism of the bailout on the grounds that it is a poor deal for taxpayers, even though several economists have made that argument.
On their November 24 broadcasts, all three network evening news programs included reports on the bailout of Citigroup that included interviews with supporters of the deal. The report on NBC's Nightly News, for example, featured clips from interviews with Citigroup CEO Gary Crittenden and with "[o]ne of Citi's biggest investors," Saudi Prince Al-Waleed bin Talal. However, only the CBS Evening News' report included any criticism of the bailout, and that criticism came from Egan-Jones Rating Co. founding principal Sean Egan, who said that the bailout was not large enough. None of the reports featured criticism of the bailout on the grounds that it is a poor deal for taxpayers, even though several economists have strongly criticized the bailout on those grounds.
Prominent economists critical of the Citigroup bailout include:
- Andrew Samwick, professor of economics and director of the Nelson A. Rockefeller Center at Dartmouth College, who wrote of the bailout in a November 24 blog post: "The technical term for this is a joke." He continued:
Citigroup has plenty of assets. It has just written too many claims on those assets. Those holding those claims need to face the reality that their claims are worth less than they were promised and adjust to that reality. That means either liquidating the firm, selling off the assets to the highest bidders, or becoming the new equity holders of the firm. The FDIC can get involved as needed to manage its contingent liabilities to insured depositors.
If the government is to get involved beyond that, it should be senior debt to the restructured entity, not preferred equity (i.e. junior to the most junior debt) to the existing entity.
- New York Times columnist and Nobel laureate Paul Krugman, who wrote in a November 24 blog post: "A bailout was necessary -- but this bailout is an outrage: a lousy deal for the taxpayers, no accountability for management, and just to make things perfect, quite possibly inadequate, so that Citi will be back for more" [emphases in original].
- University of California at Berkeley economics professor J. Bradford DeLong, who cited Krugman in a November 24 blog post headlined "The Citigroup Bailout: What Are They Doing," adding: "It is unclear to me why they aren't just buying common stock. As it is, they're endangering their own reputations to an extraordinary degree."
Additionally, The Hill reported in a November 24 article that Senate Majority Leader Harry Reid (D-NV) "criticize[d] the deal in a statement," and quoted his assertion, "Given the scope and size of this arrangement with Citigroup and the fact it is different from the others, Treasury should be prepared to defend that taxpayers are adequately protected."
Further, in a November 23 blog post, former Labor Secretary Robert Reich wrote:
If you had any doubt at all about the primacy of Wall Street over Main Street; the utter lack of transparency behind the biggest government giveaway in history to financial executives, and their shareholders, directors, and creditors; and the intimate connections the lie between Administrations -- both Republican and Democratic -- and the heavyweights on Wall Street, your doubts should be laid to rest.
[...]
This is not a particularly good deal for American taxpayers, but it is a marvelous deal for Citi. In return for all the cash and guarantees they are giving away, taxpayers will get only $27 billion of preferred shares paying an 8 percent dividend. No other strings are attached. The senior executives of Citi, including those who have served at the highest levels in the US government, have done their jobs exceedingly well. The American public, including the media, have not the slightest clue what just happened.
On Nightly News, CNBC anchor Erin Burnett's report included interview clips from:
- Crittenden, who said: "I think what we've done is increase the confidence that the company has the strength to do what it needs to in this environment."
- Prince Al-Waleed, who said: "We have been with Citigroup since almost two decades, and we anticipate to continue with Citigroup."
- Harvard University economics professor Kenneth Rogoff, who asserted: "Citicorp is on life support, basically. A lot of the financial system is basically on a respirator, and it's just being given food through a food tube in this. It's not getting it off the respirator." Rogoff later added: "I think the thing is, is that if we lose financing in the country, everything goes to stop. It's like turning off the electricity."
- Sandler O'Neil chief strategist Robert Albertson, who stated, "Of the two, by a large factor, the financial sector is far more important to our economy than any single industry, even one as important as autos."
On the CBS Evening News, correspondent Kelly Wallace's report included clips from interviews with Egan and Jordan Goodman, author of Fast Profits in Hard Times: 10 Secret Strategies to Make You Rich in an Up or Down Economy. Egan asserted, "The $20 billion is about 10 percent of what Citicorp needs to get back to financial health. They need about 200 billion. They got 20, they need 200." Goodman said, "Citigroup is one of the largest financial institutions in the world, and if it was to go under, it would bring the entire financial system down with it." In the following segment, guest anchor Harry Smith interviewed former Securities and Exchange Commission chairman Arthur Levitt, who stated, "I think the government is doing what they should do. They have to help restore public confidence."
On ABC's World News, correspondent Betsy Stark's report featured clips from interviews with David Trone, a bank analyst with Fox-Pitt Kelton CCW, and with Jonathan Corpina, a trader on the New York Stock Exchange. Trone said of the bailout, "This is the route they should have gone all along," while Corpina said it was "the news that was the catalyst for the market today. Everything else just rallied with it."
From the November 24 broadcast of NBC's Nightly News with Brian Williams:
BRIAN WILLIAMS (anchor): And now to the sudden fall of Citigroup. Just a few months ago, they were giants, considering buying Wachovia to rescue it; now they need rescuing. So the government stepped in during the night last night. And this intervention, by the way, potentially putting a whole lot of taxpayer money at risk. CNBC's Erin Burnett is with us for more on this. What an epic story.
BURNETT: It certainly is an epic story, and you said it. It was so different a few months ago. And now what we've learned is Citigroup is simply too big to fail, and the government rescue, as Brian said, announced last night sparked the biggest two-day rally in the market since 1987.
[begin video clip]
BURNETT: Another government bailout. This time, Citigroup and investors cheered. The government announcing Citigroup will get an influx of $20 billion and a taxpayer guarantee for more than 300 billion in troubled assets.
PRESIDENT GEORGE W. BUSH: This is a tough situation for America. But we'll recover from it. And the first step to recovery is to safeguard our financial system.
BURNETT: In return, the government gets a more than 7 percent stake in a company weighed down by failed home, auto, and credit-card loans.
ROGOFF: Citicorp is on life support, basically. A lot of the financial system is basically on a respirator, and it's just being given food through a food tube in this. It's not getting it off the respirator.
BURNETT: Citi shares plummeted more than 87 percent this year, 60 percent just last week. Today, with the bailout news, the stock rebounded nearly 60 percent, giving the markets a sigh of relief.
CRITTENDEN: I think what we've done is increase the confidence that the company has the strength to do what it needs to in this environment.
BURNETT: One of Citi's biggest investors, Saudi Prince Al-Waleed, told CNBC that the company's troubles are temporary.
PRINCE AL-WALEED: We have been with Citigroup since almost two decades, and we anticipate to continue with Citigroup.
BURNETT: U.S. officials didn't want to risk a Citigroup collapse. With more than 200 million customers worldwide and more than 300,000 employees, analysts say the ripple effect would have been catastrophic.
ROGOFF: I think the thing is, is that if we lose financing in the country, everything goes to stop. It's like turning off the electricity.
BURNETT: That's why analysts are not surprised that this government bailout came before any deal had been reached with the auto industry.
ALBERTSON: Of the two, by a large factor, the financial sector is far more important to our economy than any single industry, even one as important as autos.
[end video clip]
BURNETT: All right, Brian, the bottom line here is, I spoke to the CFO of Citigroup today, and he said no management changes. They're not exactly sure what the restrictions will be on executive compensation or whether they need to lend more, so there's still a lot of questions. And one of the biggest questions is this: Is this going to be enough for Citigroup, and once we've done this with Citigroup, do we need to do it with all the other banks? I mean, this isn't the first money that's gone into Citigroup from the taxpayer.
WILLIAMS: It's all new territory. Erin Burnett, as always, thanks.
From the November 24 broadcast of the CBS Evening News with Katie Couric:
SMITH: Now, to the latest bailout of Citigroup. The government said today it will give Citi another $20 billion from the $700 billion financial bailout package. And it will guarantee as much as $306 billion in risky Citigroup loans and securities. Kelly Wallace reports it's all aimed at preventing the financial giant from collapsing.
[begin video clip]
WALLACE: The market posted triple-digit gains after the government rescued Citigroup from the brink. The reason for the bailout, according to many analysts: The bank is just too big to fail. Until recently, it's been the largest bank in the U.S. in terms of assets, with businesses ranging from credit cards to home mortgages to investments, operating in more than 100 countries with 200 million customer accounts worldwide.
GOODMAN: Citigroup is one of the largest financial institutions in the world, and if it was to go under, it would bring the entire financial system down with it.
WALLACE: This is the second time the feds have come to the aid of the struggling financial giant in weeks. After first pumping 25 billion into the bank last month, the government is injecting an additional $20 billion, with strings attached. The money will come in exchange for shares that will pay 8 percent back to the taxpayer. Citigroup also agrees to place limits on executive pay and help homeowners facing foreclosure. But some analysts say the bailout doesn't go far enough and that the company will need much more from Uncle Sam.
EGAN: The $20 billion is about 10 percent of what Citicorp needs to get back to financial health. They need about 200 billion. They got 20, they need 200.
WALLACE: Citicorp stock shot up nearly 60 percent today to just under $6, but the stock market rally might be short-lived. Shares of other major U.S. banks like Bank of America and JPMorgan Chase have lost more than 50 percent this year. President Bush signaled more bailouts may be needed.
BUSH: And if need be, we're going to make these kind of decisions to safeguard our financial system in the future.
WALLACE: Why rescue Citigroup and not the Big Three automakers? The Treasury secretary says the $700 billion bailout bill is for the financial sector only. Help for anyone else requires Congress to change the law. Kelly Wallace, CBS News, New York.
[end video clip]
SMITH: Earlier today, I spoke about the financial crisis and the government bailouts with former Securities and Exchange Commission chairman Arthur Levitt. I asked him if Citigroup's need for a second bailout means the crisis is even worse than we thought.
[begin video clip]
LEVITT: I think it probably is worse than we thought, but I think the government is doing what they should do. They have to help restore public confidence.
SMITH: A lot of people at home are sitting watching this and they're saying, "These folks on Wall Street have been preaching economic Darwinism for decades. Why not let them fail? They made this mess, why not let them fail?"
LEVITT: The implications of failure now are global. They cut across the economy at every level. We're talking about three basic pillars of the economy: finance, automobile, and housing. If all three of those tank, we have an economy absolutely in the depths of despair. Can't happen.
SMITH: Barack Obama puts his economic team in place today. It's two months until he takes office. Is this audacious, or is this good management on his part?
LEVITT: This is smart. I mean, we have an administration that is virtually powerless, certainly a president whom nobody listens to. What we've seen now with the new administration is we have a shadow administration in power, in place, acting in a constructive and in a cooperative way with the secretary of the Treasury, Hank Paulson. We cannot afford a lost two-month period where public confidence would disappear. We cannot afford that.
SMITH: Arthur Levitt, thank you so much for your time this evening.
LEVITT: You're quite welcome.
From the November 24 edition of ABC's World News with Charles Gibson:
CHARLES GIBSON (anchor): For the second day in a row, stocks rallied on Wall Street. The Dow industrials rose nearly 400 points, fueled by news that the government had bolstered the terms of its bailout of Citigroup, whose stock soared nearly 60 percent just today. Betsy Stark is here with terms of what the government is going to do with Citigroup.
STARK: Charlie, some say Citigroup, with $2 trillion in assets and 200 million customers around the world, is the very definition of too big to fail, so after marathon talks this weekend, and with Citi stock heading rapidly towards zero, the government orchestrated its latest and potentially most expensive taxpayer bailout to date.
[begin video clip]
STARK: Outside this Citibank in Manhattan today, some customers wondered if there is any bank where their money is now safe.
UNIDENTIFIED WOMAN: I do not think that my money is safe. I'm very, very nervous about it.
UNIDENTIFIED MAN: Where can you find a bank that is going to stay afloat these days?
STARK: That chilling loss of confidence in the U.S. banking system was clearly on the minds of government officials as they mapped out a sweeping new plan to keep Citi afloat. The bank is getting $20 billion in cash from the government's $700 billion rescue fund on top of the $25 billion it received just a month ago. But now the government is going even farther, for the first time guaranteeing up to $306 billion in risky assets held by the bank. If the value of those assets drops, Citi is responsible for the first $37 billion of losses, and the taxpayer is on the hook for most of the rest.
TRONE: This is the route they should have gone all along. The approach of giving money to the banks without, you know, carving out or guaranteeing their problem assets, you're leaving the fear factor still there. So, this new tactic is a different approach, which obviously is a response to that stock performance last week.
STARK: Last week, shares of Citigroup tanked, dropping 60 percent to less than $4 a share.
UNIDENTIFIED TRADER: How's U.S. Bank now?
STARK: Today, news of the bailout ignited a powerful rally in financial stocks, Citi jumping 58 percent, Bank of America, JPMorgan Chase, Goldman Sachs, and Morgan Stanley all up dramatically.
CORPINA: Clearly, you know, this was the news that was the catalyst for the market today. Everything else just rallied with it.
STARK: And what's in it for the taxpayer? They get a $27 billion investment stake in Citigroup and the option to buy more. Plus, Citi has agreed to do more to help homeowners, to slash dividend payments to virtually nothing, and put stricter limits on executive compensation.
[end video clip]
STARK: Americans may be wondering if other banks will now need a government bailout. Today, President Bush said his administration will do what's necessary to safeguard the financial system. After today's bailout, those safeguards now seem to include dealing with toxic assets, an approach Secretary Paulson suggested was ineffective just a few weeks ago, Charlie.
GIBSON: All right. Betsy Stark, reporting again, tonight.
"Prince Al-Waleed, who said: "We have been with Citigroup since almost two decades, and we anticipate to continue with Citigroup..."
So how much of citigroup do the Saudis own? Just asking.
It's a matter of public record. You can look it up yourself, you know. But, feel free to write back and ask someone else to do the work for you. Liberals....sheesh
You could have said something else, Philib, instead of being a douchebag to a nice lady who was asking a simple question, ending with a smear of all liberals.
Just more proof that you're a pig.
I don't see the bailout as being political one way or the other. It's deemed necessary by most people from both parties and Obama supports it as far as I know.
So I'm not following the criticism by MMFA.
Maybe but not one news program discussed why our tax payer money is going toward Citibank paying the New York Mets 400 Million dollars over 20 years for the rights to have Citi Field named after them. That deal should have been voided yesterday. Shame on the Govt for that and the media for not discussing this more.
Are you in the position to tell major financial companies HOW to advertise? Well, if you are, you should have thought of this problem. If you're not, then why are you trying?
Why don't you do your typical liberal plan....boycott all Mets games. And, boycott all advertisers who use Mets/Citibank stadium. Don't worry about what it will do to the economy, there aren't that many liberals who actually DO anything, so no boycotting will actually happen. Liberals just just use it as a threat.
Wow Phil you are a complete idiot.
this has nothing to do with "political". it depends on what you mean by "bailout". that's a very broad term. the question here is whether this is a good thing for taxpayers or is it a good thing for the shareholders and executives. are they being rewarded for incompetence? why, for instance, are the words of the ceo of citigroup, who is hardly nuetral, more important than some of these economists? particularly krugman, who precisely predicted this mortgage meltdown three years ago and is very critical of this deal. quoting almost exclusively those who have an interest in and will profit from this "bailout" is like quoting the the fox guarding the henhouse.
I think they're trying to point out the double standard regarding bailouts. When the big three in the auto industry put in for their welfare check, there were and still are many interviews conducted with people criticizing the plan which is in stark contrast to what's happening with the banking industry. I wonder if it has something to do with blue collar industry vs. white collar industry.
Yeah, loonz. Perhaps because Citigroup doesn't have any union employees on whom to blame everything?...
Maybe it's rich republicans working with rich democrats. Neither side wants to lose their richness. WHY would rich politicians be against a bail-out for the banks that hide their money?? Considering the kind of people O'bama has been known to associate with, I would never doubt that he would support this bail-out and every other bail-out soon to be devised.
As for the big-3 whiners. They are the ones who negotiated those unrealistic union contracts. Now they should pay them. If they can't run a business in a profitable manner, get out of the business. We don't need them. There are plenty of quality import cars to choose from.
Trunciate logic much?
Loan, bailout who cares about the difference?
Giving money to Wall Street, good. Giving money to Main Street, bad (as far as the media is concerned).
I wouldn't have a problem with bailing out companies if the corruption wasn't so bad at the executive and board level of these corporations. I'm sorry, but unless you founded the company like Bill Gates or Steve Jobs, paying some CEO over $50,000,000/year to run a publicly traded company is ludicrous. That isn't capitalism, it's corruption.
If you really feel that way, then don't buy the stocks of the companies you don't trust. Get all your freinds to stop buying those stocks, too. Start another liberal boycott.
CEO's get paid according to what they agree to. If you want to whine about their high pay, then whine to THEM!!
Apparently you are the failed abortion around here. These same CEO's that you speak of are asking the Federal government to BAIL THEM OUT! The government should not be bailing out corporations that irresponsibly overpay its officers.
Otherwords corporate interets are always represented and other points of views or people are not , just like the run up to the war on Iraq 90% were always representing the military , pro invasion politicians or " intelligence analysts " .
The BIAS is built in before anybody opens their mouth , they will always represent corporate interests , U.S. foreign policy , anit-critics of the U.S., pro - israeli ( so dont report spies for israel, those beiing charged or the misery of Palestinians or the sometimes up to 15 to 20 killed in gaza .
Report victims overseas when NOT victims of U.S. foreign policy , case in point the huge spike in Somalia stories, because it involves nasty swashbuckling PIRATES off the coast , yet the BIG story the U.S. media has CENSORED is U.S. military dropping bombs in Somalia , arresting people , supporting Ethiopian Military that are killing civilians and accuse of Rapes .
No pro Union people need apply , no critics of israel , no critics of U.S. foreign policy , ( unless they are ther to claim NOT ENOUGH BOMBS ARE BEING DROPPED ), and don't DARE say we are SPENDING TOO MUCH ON THE MILITARY WEAPONS AND AND bases AND THAT IT MIGHT BE LINKED TO OUR FINANCIAL PROBLEMS .
One of the scariest things I've read was from a Former KGB agent, an expert on propaganda and that is people from the Soviet Union KNEW they were being lied to by PRAVDA and didn't believe anything they heard , but in America propaganda is easier believed and most people tHINK they are hearing the truth and are EASIER FOOLED .
The brain washing in U.S. media is being more refined every day , convincing most what they don't hear isnt important and they they hear is the most important .
I am certain that there is one thing most liberals and conservatives could agree on: America does not get accurate reporting of facts in the 'news' programs. CNN, NBC, ABC, CBS, Fox, NY TIMES, LA TIMES, etc all are biased in one way or another. Citigroup has big bucks and unfortunately, money talks. Ofcourse most networks wouldn't report the negative implications of a bailout for Citigroup.
In fact, The NewsHour With Jim Lehrer had several people in its interview or panel segments who said Treasury cut a bad deal. On both the NewsHour and, later, on Countdown, several guests pointed out that the size of the CitiCorp handout was more than the capitalized value of the entire company.
Jeffrey Brown asked the guest (whose name escapes me), "So if a private citizen came along with this much money, they could have bought the entire business?"
"Yes," came the reply, "and instead Paulson only got (the government) a 7% stake."
This is not to say that your criticism of the main network newscasts is wrong, but it is to point out that there are other television news outlets that people can turn to for a more-rounded picture.
Ancient, please report here some more. Thanks.