How Much Of Citi Did We Already Own?
by Byrne Hobart
Congratulations: you, the taxpayer, now own even more of what used to be America’s biggest bank. That’s right: the government is once again raising its stake in Citigroup by switching from preferred stock (which pays a high dividend, and is basically like a bond) to common stock (which is closer to just owning part of the business).
So, in theory, We The People own 36% of Citibank. And this is considered very big news.
But is it? Consider how much the government is already involved in Citi:
- Most of Citibank’s deposits are guaranteed by the FDIC. Which means that when you deposit money at Citibank, you’re really lending it to the government, which is lending the money back to Citibank. Citi is mostly doing the paperwork.
- Citi makes loans with those deposits. Who do they loan to? Mortgages and government bonds make up a huge chunk of the portfolios of many banks, and, once again, those are loans to the government.
- Government regulations control how much they can borrow, how much they can lend, what they can lend to, where they can lend, what kinds of loans they can resell, and who they can deal with. The government has veto power over everything Citibank does.
- Citi pays corporate taxes — over 25% of their pretax income, as of 2006 (the last time their financial statements made sense). Usually, if you got a quarter of whatever a company earned, you’d say you owned 25% of it.
- Citi pays its employees, which means it sloughs off billions of dollars in income taxes, FICA taxes, and the like.
So, let’s get this straight. Citibank is a company that helps people lend to the government, which lends to Citi so they can lend back to the government. Citibank earns money doing this, and the single largest recipient of that money is the government. The government gets to supervise every step of this process, and also collects 25% of the profits, and up to about half of the money Citi pays to its employees.
And now people are up in arms about the government buying a little more stock? Let’s be realistic. Citi isn’t being nationalized now — they’ve been about 95% nationalized for a long, long time. This is not a news story: it’s a rounding error.