The Wall Street Journal reports:
Executives at the New York company plan to narrow the focus of Citigroup’s U.S. branch network to six major metropolitan areas, according to people familiar with the situation. Citigroup also will limit its overall consumer lending in the U.S. primarily to credit cards and “jumbo” mortgages, while catering largely to affluent customers.
Huffington Post writes:
Citigroup, which has received $45 billion in TARP funds — in addition to billions in government asset guarantees — has come up with a brash tax-payer funded restructuring plan: cut U.S. locations and limit most lending to only the wealthy.
Actually, Citigroup got a “secret $230 billion bailout”, according to Congressman Alan Grayson.
In any event, as we have been writing for a year, the bailouts won’t do anything to increase loans to those who really need them – average individuals and small businesses. Indeed, just today, the bailout’s Special Inspector General – Neil Barofsky – said that the Troubled Asset Relief Program has failed to increase bank lending. And that, in turn, may mean that the economy won’t recover any time soon.
As Huffington Post puts it:
For U.S. taxpayers, however, the larger question is why taxpayer money should have gone to a bank that is now looking to severely scale back both its lending and retail presence.
Note: I understand that some will argue that Citi is just being prudent, shifting from riskier to safer loans.
But as William K. Black – senior regulator during the S&L crisis, professor of Economics and Law, and an expert on white collar financial crime – says, the banks intentionally made loans to people who are uncreditworthy, because they’ll agree to pay you more, and that’s how you grow rapidly. You can grow really fast if you loan to people who can’t you pay you back.
This combination guarantees stratospheric initial profits during the expansion phase of the bubble. But it guarantees a catastrophic subsequent failure when the bubble loses steam. And collectively – if a lot of companies are playing this game – it produces extraordinary losses (more than all other forms of property crime combined), and a crash. In other words, the companies intentionally make loans to people who will not be able to repay them, because – during an expanding bubble phase – they’ll make huge sums of money. The top executives of these companies will make massive salaries and bonuses during the bubble (enough to live like kings even even if the companies go belly up after the bubble phase).
In other words, Citi made money hand-over-fast during the expansionary phase of the bubble by making unsound loans, then took billions in taxpayer bailouts when the bubble burst, and is now shifting to loaning only to the wealthy – leaving the average American without access to credit.