Citigroup Takes Cash to Spain

Thanks for nothing, Citigroup .

Treasury Secretary Henry Paulson gives the U.S. bank $45 billion in taxpayer money to keep it afloat and get it to pump some money into the emaciated U.S. lending system and what does Citi do?

Buy a Spanish highway operator.

Yes, you heard right. A Citigroup infrastructure fund agreed to take over Spain's Itinere from Sacyr Vallehermoso in a deal valued at about $10 billion, which includes about $6.3 billion in debt that Citi will take on.

Just what Citi needs: more debt.

Of course, Citi officials will tell us this is good debt, unlike the $306 billion in risky assets U.S. regulators agreed to backstop last week as part of a $20 billion taxpayer-funded cash injection to shore up the bank. That's on top of the $25 billion in federal bailout money Citi received earlier this year.

U.S. taxpayers are definitely getting a great return on that investment.

I'll bet Paulson just can't wait to hand over another $10 billion to Citi when the bank complains that the global recession is eating into the tolls it thought it would be collecting in Spain.

Be Thankful It's Not Worse

It may seem like there's little to be thankful for this Thanksgiving, but that depends on your perspective.

Consider Tiffany . The luxury retailer said today that third-quarter sales slipped only 1% and profit declined by about half. Yes, that's bad. But the jeweler is still profitable, right?

At the other end of the spectrum, farm equipment maker Deere reported a 21% jump in fourth-quarter sales today, and its 18% drop in profit was due to costs for closing a facility in Canada. That sounds solid, doesn't it?

So you see, it could be worse. It could be a whole lot worse.

We may be in a recession, but this is no depression.

The unemployment rate is rising, but it's only at 6.5%. Compare that to 7.5% in Germany, 8% in France and 11.3% in Spain. Or how about 23% in South Africa?

Inflation, meanwhile, is relatively tame at 3.7%. How about 4.7% in Britain, 6.4% in Singapore, 14.2% in Russia and 35.6% in Venezuela?

Combine those two indicators and you get the so-called misery index, which for the U.S. stands at 10.2%, up from 8.3% a year ago. That's just about the global average, with Thailand's 5% misery index at the low end and Venezuela's 42% marking the high.

So enough with the doom and gloom, already. This whole crummy stock market and economic slowdown is in large part a crisis of confidence. Consumers represent 70% of U.S. GDP, so it's no good if they get too spooked and stop spending. Lucky for us, consumers don't seem to fully realize how dire things could get. Some have cut back on spending, but so far not nearly at the level of the recession in the 1980s.

Ordinarily, I'd be outraged about the economic and political ignorance of the American populace, but this year I'm thankful for it. Please keep spending, folks.

Google-O-Meter Signals Doom

Forget about the OECD report saying we're in for the worst recession since the early 1980s.

The true sign of how bad it's going to get comes from Google, which is throwing its contract workers to the wolves.

The Internet search giant and ultimate barometer of consumer behavior says it will significantly reduce the number of its roughly 10,000 contractors in anticipation of a worsening economy.

It may be the right thing to do from a fiduciary perspective, but the folks at Google don't seem to realize how damaging it is to the psyche of consumers and investors alike to see the ultimate growth machine scaling back.

Now we're doomed. The only ray of hope is that Google isn't planning to cut its internal staff. So my reading of the Google-O-Meter is that a bad recession is coming, but maybe it won't last too long.

If Google starts laying off its own people, then all bets are off.

Citi’s Not Worth $45 Billion

Remember when Citi was looking for deals and ready to buy Wachovia ? How about Citi shares at $23 last month? Or $35 a year ago. Or even $55 in May 2007.

Now Citi’s the latest bailout story, with the U.S. government donating $20 billion to the cause. That’s on top of the $25 billion in taxpayer funds Citi received last month.

So why doesn’t the government own all of Citi now? For $45 billion, it should -- the bank was only worth about $20 billion at Friday’s closing share price of $3.77. (For what it’s worth, Wachovia’s trading above $4)

It makes the Feds look foolish to have allowed Wells Fargo to scuttle the government-brokered marriage of Citi and Wachovia last month. That dowry would have been cheaper. But then again, maybe the government would be bailing out Wells Fargo now. I guess it’s money out the window either way.

I just feel bad for the folks at Lehman Brothers, the bank that died before our government decided not to let any more banks die.

The Five Dumbest Things on Wall Street: Nov. 21

By Greg Greenberg, TheStreet.com

We Have Words to Describe Ken Lewis

One of them is ungrateful. Hypocrite is another.

Bank of America CEO Ken Lewis slammed a potential auto-industry bailout this Tuesday. The banking bigwig made his remarks just as auto executives from GM , Ford and Chrysler were on Capitol Hill begging for a $25 billion emergency bridge loan to avert a collapse of one or more of their companies.

"I think there's one too many" automakers, Lewis said to the Detroit Economic Club during a meeting in Cobo Center, the downtown convention center that's home to the North American International Auto Show each January.

"I think the American people are suspect of just giving more money and buying more time," he told reporters following the speech, according to The Associated Press. "They want to see that the companies have, in fact, changed and the strategies have changed."

Sorry Ken, but bankers in glass houses shouldn't toss grenades.

Lewis shouldn't balk at anyone getting a handout, after nine large banks, including Bank of America, Wells Fargo, Citigroup and JPMorgan Chase, received $125 billion last month.

Oh, and what did Lewis do with the $25 billion of the government's largesse that you said you didn't need? Instead of lending it out to Americans being crushed by the credit crisis, like he was supposed to do, he announced this week that Bank of America is buying more shares of China Construction Bank, raising its stake to 19.1% of the company.

If a Big 3 bailout fails, at least taxpayer dollars will be squandered over here, not half a world away.

Dumb-o-meter score: 95 -- Banks had their turn to beg Congress, let automakers have theirs.

No Double Dipping, Aegon!

Dutch insurer Aegon wants to dip into not one but two government bailouts.

Aegon applied for more than $1 billion in U.S. government support Tuesday. To qualify for the funds, the Dutch company, which owns U.S. life insurer Transamerica and generates three-quarters of its operating profit in the U.S., may buy Maryland-based Suburban Federal Savings Bank, Reuters reported. Without the purchase, Aegon can't hold out its corporate palm.

Hey, why not buy another bank to get some government aid? Everybody else is doing it. Just this week The Hartford Group, Genworth Financial and Lincoln National announced plans to buy small savings and loans in order to meet the requirements to get a piece of the $700 billion bank bailout.

The big difference is that Aegon already received 3 billion euros from the Dutch government last month. And now they want to go dutch with the U.S. taxpayer, too?

And get this, Aegon admits it doesn't even need the money -- CFO Jos Streppel said this week that the company "has a sufficient capital buffer given our recent actions."

How dumb is that -- admitting they don't need the money but asking for it anyway? They should be rejected from the government give-away for that reason alone.

At least U.S. banks are smart enough to tell the government how miserable they are.

Dumb-o-meter score: 85 -- The Bank of Five Dumbest would like to apply for federal funds, too!

Fannie Stock Faces Eviction

The New York Stock Exchange may soon send Fannie Mae an eviction notice.

Mortgage-financing giant Fannie Mae announced on Tuesday that its stock failed to satisfy NYSE price-related requirements and may lose its listing. The NYSE requires that the average closing price of a stock remain above $1 per share. Fannie Mae stock, which a year ago was trading as high as $40.45, closed at 47 cents Tuesday.

Let's get this straight because the irony is just too delicious to swallow. Washington-based Fannie Mae, which along with fellow mortgage player Freddie Mac owns or guarantees about half of the U.S.' $12 trillion mortgage market, may have its shares evicted from their home on the NYSE.

You just have to smile at that one, even if it sounds as sickening as the $29 billion third-quarter loss the company announced last week.

Fannie is likely to tap the $100 billion government lifeline from Washington early next year to remain solvent. Meanwhile, back on Wall Street, if Fannie Mae notifies the NYSE of plans to boost its share price, it has six months from the Nov. 12 date of the notification to bring the stock above $1 for 30 consecutive trading days and remain listed.

So will Fannie be kicked to the curb?

Mae be.

Dumb-o-meter score: 80 -- Talk about a kick in the Fannie

Parsons' Loser Email

Dick Parsons' sympathy plea for Citigroup Chairman Sir Win Bischoff is a real loser.

In a Nov. 13 email to employees worldwide, Citigroup board member, and former Time Warner CEO Richard Parsons set the record straight, denying a Wall Street Journal report claiming the board was considering him for Bischoff's job.

Parsons called the news coverage "irresponsible and completely inaccurate," adding that the board of directors and management are operating as "one team completely aligned on critical issues, opportunities, and the direction of the company."

Parsons then listed the company's so-called "accomplishments," like raising new capital and reorganizing its businesses, before signing off in his email with an inspiring "Keep the Faith!"

Um, sorry Dick, but we doubt the troops at Citigroup have any faith left in you, considering your mismanagement of what was formerly the world's largest bank. As for the direction of the company, well, we'll just point out that the stock price is down to $8 a share.

Soon, Parsons and his boardroom buddies may be the only "team" left at the company. On Monday, the besieged bank said it was cutting approximately 53,000 more jobs over the coming quarters. Citi's total headcount is being reduced by 20% from its peak of 375,000 at the end of 2007.

So Dick, we have to ask: How can Citigroup employees "keep the faith," when they can't keep their jobs?

Perhaps more Citigroup employees would keep their jobs if Parsons would eventually lose his.

Dumb-o-meter score: 70 -- There is no 'Group' left in Citi.

MGM CEO's Third Degree

MGM's CEO couldn't take the heat over his graduate degree. So he got out of the casino.

Terrence Lanni suddenly announced his retirement last week from the casino giant's top spot, spinning the same tired yarn about wanting to spend more time doing charity work.

Fair enough, we thought at the time. He's been on the job 13 years, and with the stock down 90% this year and Las Vegas on the mother of all economic losing streaks, it made sense for Lanni to pass the torch before things got any worse. (As in the Las Vegas Sands' flirt with bankruptcy.)

Then we discovered that Lanni's resignation was arriving just a few hours ahead of a Wall Street Journal report revealing that, counter to his corporate biography, the gaming CEO did not earn a master's degree in finance at the University of Southern California. At learning that, dear reader, we knew we hit the stupidity Jackpot.

A USC spokesman said Thursday that Lanni finished classes toward the degree between 1965 and 1967 but was never awarded a diploma. Lanni's spokesman says that he was awarded an honorary degree from the school at a ceremony in 1992, before adding that the academic inquiry had "no bearing whatsoever" on his retirement.

Unfortunately, the school says no honorary master's degrees in business have been awarded since 1933.

We couldn't make this stuff up; we'll leave that to Lanni.

Dumb-o-meter score: 65 -- Literally speaking, some CEOs never learn.

Let's All Bank With GMAC

GMAC wants to become a bank holding company so it can participate in the $700 billion banking bailout.

Apparently the deep pockets of Cerberus, the private equity firm that owns a majority of GMAC, aren't deep enough. And we all know that General Motors(GM Quote), which owns a minority stake in GMAC, doesn't have any cash to spare.

So it makes perfect sense for taxpayers to help out.
Why not? After all, Goldman Sachs (GS Quote) did it, and many insurers like Hartford Financial (HIG Quote) and Lincoln National(LNC Quote) are doing it too -- buying little banks so they can qualify for a piece of the taxpayer pie.

This is apparently the new American way. Companies screw up, get in trouble and then turn to the government to bail them out. No worries, the government can always print more money, right?

Let's all switch our bank accounts to GMAC. It's obviously a well-run business.

Help Car Buyers If Not Carmakers

The way I see it, taxpayers are going to be helping U.S. carmakers one way or another.

If Congress doesn't come out with an official bailout, then General Motors(GM Quote), Ford (F Quote) and Chrysler will likely seek a back-door bailout by declaring bankruptcy and dumping their burdensome employee retirement obligations on the U.S. Pension Benefit Guaranty Corp.

OK, the PBGC isn't directly supported by taxes and isn't officially backed by the U.S. government -- but that's what they said about Fannie Mae (FNM Quote) and Freddie Mac (FRE Quote), right?
The PBGC is already burdened with a nearly $11 billion deficit for fiscal 2008 after taking over pension plans dumped in recent years by U.S. airlines, including UAL (UAUA Quote), US Airways (LCC Quote) and Delta(DAL Quote).
If the carmakers don't get help from Congress, you can be sure they'll follow the example of the airlines.
Where it gets really interesting for lawmakers is deciding whether foreign carmakers should get help, too. These days, Toyota(TM Quote), Honda(HMC Quote), Daimler's(DAI Quote) Mercedes and BMW have almost as many factories and employees in the U.S. as the so-called Big Three.
So maybe the best solution is to offer a car loan deduction to U.S. taxpayers along the lines of the mortgage deduction. Even crappy cars may move off the lots if they become more affordable.
After that, let's ditch the gas tax so we can afford to fill up the tanks of our big, shiny, new American gas guzzlers.
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Today's Outrage: Yahoo!'s Yang Gets Yanked

Jerry Yang's exit from the CEO role at Yahoo! (Stock Quote: YHOO) was inevitable.

The big question is why Yahoo! is even bothering to look for a replacement. Surely Microsoft (Stock Quote: MSFT) will want to put its own cronies in charge. Isn't that inevitable, too?

Yang fought Microsoft's overtures and the $33-per-share takeover offer, Yahoo! shares have dropped to about $10, and now Yang's stepping aside. That's no coincidence.

Personally, I feel bad for Yang. He never had a fighting chance. The stock market collapsed out from under him as the crisis in the financial sector engulfed everything in its path. The economic slowdown is now heading straight into recession, and online advertising is shriveling up.

Yahoo! may well have been better off without Microsoft. But it looks like we'll never know.

Where's MY Bailout?

Consumers everywhere, rejoice! Treasury Secretary Henry Paulson is coming to the rescue.

The $700 billion banking bailout is being opened up to help consumers get credit cards, school loans or borrow money to buy a car. Foreclosure relief may also be included.

Turns out the trickle-down theory wasn't working the way Paulson had hoped. Giving banks such as Citigroup (Stock Quote: C) and Wells Fargo (Stock Quote: WFC) a bunch of money was supposed to get the system back to normal. But the newfound caution in the financial services industry won't be abandoned that easily. Nope. The banks found religion. They are playing it safe. No more lending with reckless abandon, even with taxpayer money.

So looks like the government is going to become the new "Bank of the People."

Of course, that doesn't really help me. I'm not thinking about buying a car, and I don't need a student loan -- and I'm still getting flooded with all those annoying credit card offers in the mail.

The bailout I need is for my 401(k) retirement plan. If Paulson wants to buy some distressed assets, he can start there! And I bet there are millions more like me.