It’s not even the end of March, but I’m willing to back this against all comers for the dumbest statement we’ll read in a major newspaper all year:
Among the banks that rule Wall Street, Citigroup got a bailout that was bigger than the rest. Now the company is about to pay a king’s ransom for its federal rescue.
That’s David Cho of the Washington Post, and he really shouldn’t be allowed to write about stuff he simply doesn’t begin to understand.
In October and November 2008, Citigroup received more than $45 billion in TARP money, in two installments, in exchange for preferred shares. That package was later restructured. $20 billion was converted into a loan, and $25 billion was converted into common stock last September.
So now the government proposes to sell its entire equity stake in Citigroup. And because the stock price has gone up roughly a dollar in the last six months, the government stands to make a handsome profit:
The Obama administration is making final preparations to sell its stake in the New York bank, according to industry and federal sources. At today’s prices, the sale would net more than $8 billion, by far the largest profit returned from any firm that accepted bailout funds, and the transaction would be the second-largest stock sale in history.
On paper, the government’s 27 percent stake has grown in value to $33 billion. The size of the deal in the works has Wall Street buzzing.
And that, incredibly enough, is Cho’s entire argument. Because the government is making a $8 billion profit on the investment, Citigroup is paying a king’s ransom for its federal rescue.
We can only conclude that Cho simply doesn’t begin to realize that the $8 billion profit doesn’t actually come from Citibank’s pocket. That when a company’s stock price goes up, it is really not the norm to allege that the company’s stockholders have somehow succeeded in gouging the company.
However, once David Cho engages in this muddled thinking, one has to wonder what he makes of the $22 billion profit that the remaining 73% of Citigroup’s stockholders have made since September 2009. At least, the government’s $8 billion was their king’s ransom for the federal rescue. Without even a quid pro quo, that $22 billion, though, must look to Cho like pure highway robbery, grand larceny on the grandest scale.