You've Just Bought Another Bank

Updated below.

Looks like we just bought another bank. The current "plan", as best as I can figure, is to take on Citigroup's losses beyond a certain (still undetermined) level. If the government does so, Citigroup will give us either warrants or preferred shares. While shares are better for we taxpayers I seem to remember Warren Buffet getting an even better deal which was preferred shares and warrants on additional shares. We should get, at the least, as good a deal as Buffet, don't you think?

If you remember Citigroup was all hot to trot to take over Wachovia just a few short weeks ago. They even had the backing of the FDIC over Wells Fargo, the eventual winner. The FDIC's insistence that Citi was the better partner for Wachovia really points out the questionable finanacial leadership we have in Washington right now.

Unfortunately, it looks like Hank Paulson and company are going to play by the same rules it has throughout this "crisis" and that is that the people who caused the crisis are going to be left in charge of the organizations they've mismanaged to the point of failure. You know that Paulson is not going to hurt any of his country club buddies. It is really amazing that there is not more public outcry over this because these folks are obviously incompetent. If they were competent and capable of managing Citigroup properly, they would have done so. The only explanation is incompetence. The actual problem is probably a combination of incompetence and the fact that Citigroup has become too large to effectively manage. If our current financial leadership itself were competent and not hamstrung with all kinds of misguided loyalties to the bad players we would nationalize the operations of the Citigroup and proceed to break it up into manageable bits while insuring none of the current culprits are involved.

Update: Paul Krugman notes this morning that a Citigroup bailout, under the circumstances, may have been worthwhile, but this bailout is outrageous: "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.

Drum and Yglesias seem to be asking all the right questions.

At the current stock price the mismanaged company is worth $20.5 billion. It's already received $25 billion from the TARP rescue plan, and the Treasury is poised to inject another $20 billion, on top of generous asset guarantees. Sure looks like a sweetheart deal to me.