By Pam Martens and Russ Martens and cross-posted from Wall Street on Parade
Citigroup was back in the news again last Tuesday when the Consumer Financial Protection Bureau (CFPB) reported that its banking unit, Citibank, was among the three banks with the highest average monthly complaints filed against it alleging credit card abuses. (The other two banks were Capital One and JPMorgan Chase.)
This is the tip of the iceberg when it comes to Citigroup and its haloed Citibank.
On May 20, 2015, Citigroup’s banking division pleaded guilty to a criminal felony charge for foreign currency rigging following a decade of serial charges against the global behemoth. (See rap sheet below.) Instead of putting this incorrigible recidivist out of business, the Federal government has continued to allow its shady proclivities to be perpetuated against an unsuspecting public.
The U.S. central bank, the Federal Reserve, which incompetently oversees Citigroup as it takes on massive derivative risk and continues to fleece the public, saw fit to secretly funnel $2 trillion of loans into Citigroup’s collapsing carcass from 2007 to at least 2010 at almost zero interest rates. During that period, Citigroup was allowed to continue to charge double-digit interest rates on its credit cards and put struggling homeowners out on the street from its tricked-up mortgages. The $2 trillion in secret loans came on top of the publicly announced $45 billion in equity infusions and more than $300 billion in asset guarantees by the Federal government to keep this ethically-challenged institution alive.
Why would the Federal government want to bail out such a recidivist lawbreaker instead of simply putting it out of business? Citigroup is one of those too-big-to-fail, too-big-to-jail and too-interconnected-to-fathom financial goblins that continue to threaten the U.S. financial landscape today.
The CFPB’s report last week brought to mind a Harper’s article by Andrew Cockburn in April 2015. Cockburn had traced the history of how Sandy Weill had parlayed Commercial Credit through a series of mergers that, thanks to the repeal of the Glass-Steagall Act by President Clinton & Company in 1999, had culminated in the too-big-to-fail Citigroup.
With the blessing of its regulators, including the Federal Reserve, Citigroup was allowed to replicate the precise banking model which had brought on the 1929 crash and Great Depression: it was allowed to hold savings deposits while making wild speculations on Wall Street and selling bogus stocks to the hapless public.
While today Bill Dudley, President of the Federal Reserve Bank of New York, incessantly fingers his worry beads and ponders what it will take to change the jaded culture of Wall Street mega banks, Cockburn quickly drilled down to the problem: Citigroup grew out of a loan sharking operation that permeates its culture…