[Corp. Watch] Casino capitalism: Organized corporate crime still pays

[Corporation Watch]

Pump and Slump: Will Citi Sleep with the Fishes?

  by Phil Mattera

(Dirt Diggers Digest, March 5 ) -- A couple of years ago, the mighty  
Citigroup traded at around $50 a share. Today, the price hovers around  
$1 and for a while was even lower.

	In other words, one of the largest financial institutions in the  
world is now in effect a penny stock. At one time, a descent to that  
level would have been enough to get a company de-listed from the New  
York Stock Exchange, but standards have been relaxed.

	Penny stocks have traditionally been associated with unscrupulous  
brokerage practices, such as the "pump and dump" schemes famously (and  
graphically) illustrated in some episodes of 'The Sopranos'. And  
Citi's record during the past decade does not suggest a moral compass  
much different from the wiseguys of Northern New Jersey.

	As the U.S. PIRG Education Fund notes in its recent report "Failed  
Bail-out", Citi helped crooked companies such as Enron carry out  
deceptive transactions, and itself set up scores of entities in off- 
shore tax havens such as the Cayman Islands in order to avoid both  
taxes and oversight.

	Citi's actions had an impact beyond its own unjust enrichment. As  
'Multinational Monitor' editor Rob Weissman and his colleagues show in  
their new report "Sold Out", Citigroup played a key role -- thanks to  
$19 million in campaign contributions and $88 million in lobbying  
expenditures -- in bringing about the demise of the Glass-Steagall Act  
and other deregulatory moves that paved the way for the current melt- 
down of the financial system.

	Yet Citi's management is, to a great extent, no longer in control of  
the company's fate. Today it is the federal government that is in  
effect trying to pump up the bank and its stock. The Obama  
administration, regrettably, is perpetuating the idea that Citi is too  
big to fail and thus requires a seemingly unlimited commitment of  
public resources.

	Unfortunately for U.S. taxpayers, the pumping will not be followed by  
a timely dumping of the federal holdings in Citi at a fat profit. In  
fact, the federal capital infusions, loss-sharing agreements and loan  
guarantees are not stabilizing the company and pushing up its stock  
price.

	The more the feds put into the bank, the less people seems to think  
it is worth. This downward move is attributed in significant part to  
short-selling of Citi's common stock by hedge funds.

	At one time, those funds were apparently in cahoots with Citi. Last  
fall the Senate Permanent Subcommittee on Investigations charged that  
Citi was one of the banks that had helped off-shore hedgefunds engage  
in tax avoidance. I guess there really is no honor among thieves.

	The U.S. government is now in the ridiculous position of having made  
commitments potentially costing hundreds of billions of dollars to a  
bank that stock investors, as of today, think is worth a total of only  
about $5 billion.

	As long as the administration avoids the seemingly inevitable need to  
nationalize and reorganize Citi and the other large so-called "zombie"  
banks, its strategy amounts to little more than "pump and slump."  
Despite the efforts of the feds, the bank whose motto is "the Citi  
never sleeps" may soon be sleeping with the fishes.