Big Bank Profile: Citigroup
|Federal taxpayer bailout received:||$341.1 billion|
|Lobbying fees in 9 months after bailout:||$4.9 million|
|Campaign contributions in 2008 federal elections:||$5.6 million|
|Profits for 1998-2008:||$145.8 billion|
|Profits for the first half of 2009:||$5.9 billion|
|Bank fees for first half of 2009:||$326 million|
|Change in bank account fees (2003-08):||+22.0%|
|Credit card income for first half of 2009:||$5.2 billion|
|Percent of first half 2009 profit from fees & credit cards:||95%|
|Median Citibank teller wage:||$12.44/hour, or $26,118 annually|
|2008 CEO Vikram Pandit pay:||$10.8 million (414 times median teller wage|
|2008 bonus pool:||$5.3 billion|
|First half 2009 bonus and compensation pool:||$12.8 billion|
|Bonuses (top 5 execs) last 10 years:||$388.1 million|
|Effective tax rate in 2008:||38.9% in 2008; -321.9% in 20071|
|Offshore subsidiaries in tax havens:||427|
Role in subprime crisis
- Citigroup had a hand in the worst of the subprime lending excesses, providing financing to the nation's three largest subprime lenders, Countrywide, Ameriquest, and New Century Financial Corp. This financing provided the companies with the capital they needed to originate subprime mortgages. Citigroup also owned CitiFinancial, another major subprime lender. Together, these four firms issued over $280 billion in subprime loans from 2005-2007.
- Citigroup fits the textbook definition of a bank that is too big to fail. In October 2007, when a CIBC World Markets analyst downgraded Citigroup to "sector underperformer" it sparked a broad stock market sell-off, wiping out $369 billion in the U.S. stock market in one day.
- Citigroup put taxpayers on the hook for up to $341.1 billion in bailout funds, plus an unknown amount from the Federal Reserve's $8 trillion in emergency programs. Citigroup's bailout includes backing for $300+ billion worth of toxic assets, essentially a multibillion insurance package for its risky bets that is being financed by taxpayers.
- Despite large financial incentives from taxpayers, Citigroup's servicing company, CitiMortgage, Inc., has started trial mortgage modifications for only 23% of its 191,128 borrowers who are eligible for the Obama Administration's Making Home Affordable Program (and are at least 60 days past due).
- Citigroup's bailout has not translated to new credit for small business. In fact, the bank's lending to American small business fell by $34 million (a 77% drop) through the SBA's flagship 7(a) program, from 2008 to 2009 (measuring each only for the first 11 months of each fiscal year).
- Citigroup is paying $400 million for naming rights to Citi Field in New York, the new home of the New York Mets.
- Citigroup sponsored the Rose Bowl last year despite already having taken $45 billion in bailout funds.
- Even after being bailed out twice, Citigroup was set to purchase a new $50 million corporate jet in January, only cancelling the order after Treasury Secretary Tim Geithner insisted they do so.
- In 2008, Citigroup lost $27.7 billion, and yet it awarded its employees $5.3 billion in bonuses, and spent more than $32.4 billion on total compensation. With the bonus money alone, Citigroup could have given each of its bank tellers an estimated $123,000 raise, well over four times their median salary.
- Now Citigroup is increasing employees' base salaries to get around limits on bonuses for TARP recipients. The bank will hike salaries by as much as 50%, so that most employees' compensation will not come down from last year's levels.
- Citigroup is also trying to give energy trader Andrew Hall a $100 million payout even though the bank has received hundreds of billions in taxpayer bailouts and guarantees. The bank claims that Hall's payout package is exempt from the purview of the Obama Administration's pay czar. The ailing bank is considering spinning off the highly profitable business unit that employs Hall so that he can keep his $100 million.
- To help pay for its executives' bloated compensation, Citigroup has made itself the beneficiary on $4.2 billion in life insurance policies for its employees and former employees. The bank gets annual tax-free income from investments in the insurance contracts, helping to offset executive compensation expenses, and then receives another tax-free windfall when employees and former employees die.
Unreasonable bank fees
- When customers overdraw their Citibank accounts, the bank charges them $34 per transaction in overdraft fees -- without even asking if they wanted to enroll in an "overdraft protection" program. As a result, if a customer overdraws his/her account by $100, and that amount that remains unpaid for seven days, the APR on what amounts to a consumer loan would be a staggering 1,768%. Also, Citigroup reorders transactions in such a way to maximize fee revenue, even though Congressional criticism has led some of its competitors to halt the practice.
- Earlier this year, Citigroup arbitrarily raised interest rates on 13-15 million credit cards, and canceled others without first notifying the cardholders. Millions of Americans have been hurt by the credit crunch as banks like Citigroup tighten credit despite taking billions in bailout funds to jumpstart the economy.
- A recent report by the Center for American Progress (CAP) examining bank lending practices in 2006 (the height of the housing boom) reveals that Citigroup was much more likely to steer Black and Latino applicants than White applicants into higher priced subprime mortgages: 76.6% of Black borrowers and 73.5% of Latino borrowers compared to 51.2% of White borrowers.
- The CAP report also shows that the racial disparity was even greater for borrowers earning $100,000 or more: while the percentage of high income borrowers receiving high priced mortgages was cut nearly in half to 27.6% among Whites, the percentage remained relatively constant at 70.3% among high income Blacks and increased to 73.5% among high income Latinos. The extent of the disparity and its accentuation among higher income earners raise questions about discrimination in the bank's lending practices. This practice is known as reverse redlining and is prohibited under the federal Fair Housing Act.
Lobbying against workers and consumer interests
- Citigroup is a member of the Financial Services Roundtable, which lobbied against the Employee Free Choice Act in every quarter of 2008 and has made joining with the U.S. Chamber of Commerce to defeat it a top priority for 2009. The measure would make it easier for workers to bargain with employers for better wages, benefits, and working conditions by ensuring that they can exercise a free choice to join together in a union without management interference or intimidation.
- On March 11th, Citigroup hosted a conference call to build opposition to the Employee Free Choice Act. The call was led by a senior executive at the U.S. Chamber of Commerce. Additionally, Citigroup cited the bill when downgrading Wal-Mart's rating, leading to speculation that the move was politically motivated to try to paint the bill as anti-business.
- According to data obtained from Opensecrets.org, Citigroup spent $8.8 million on lobbying in 2008, and continued to lobby in the fourth quarter, even after receiving bailout funds. In the three quarters since the bailout, Citigroup has spent almost $4.9 million lobbying on issues including the Cardholders' Bill of Rights Act of 2009, the Helping Families Save Their Homes Act of 2009, the Consumer Overdraft Protection Fair Practices Act, the Mortgage Reform & Anti Predatory Lending Act, the Compensation Fairness Act of 2009, modernization of financial regulation, and international and domestic taxation.
- To carry out its agenda, Citigroup has hired any number of unsavory lobbyists, including Nicholas Calio, now Executive Vice President of Government Affairs for the bank. Calio was a member of the White House Iraq Group, the group charged with shaping the case for the war in Iraq by "educating the public" about the threat posed by Sadaam Hussein. Calio ultimately left the Bush administration stating ''I can't pay my bills. It comes down to the two F's: family and finances.'' Calio's position paid $145,000 per year. Calio left the Bush administration because he claimed that his $145,000 salary was not enough to "pay his bills" so instead he turned to lobbying for the financial industry. He also keeps over 1,000 bottles of wine in his basement.
- Citi has also hired lobbyist Steve Elmendorf, who, in addition to peddling Citi's message about bankruptcy reform and executive compensation, lobbies on behalf of UnitedHealth Group, the largest health insurance company in the US.