{"id":1135,"date":"2008-11-24T13:11:35","date_gmt":"2008-11-24T17:11:35","guid":{"rendered":"http:\/\/philip.greenspun.com\/blog\/?p=1135"},"modified":"2008-11-24T13:11:35","modified_gmt":"2008-11-24T17:11:35","slug":"citigroup-bailout-socializing-loss-after-privatizing-gains","status":"publish","type":"post","link":"https:\/\/philip.greenspun.com\/blog\/2008\/11\/24\/citigroup-bailout-socializing-loss-after-privatizing-gains\/","title":{"rendered":"Citigroup Bailout: Socializing Loss after Privatizing Gains"},"content":{"rendered":"

Citigroup took on a lot of risk earlier in this decade.\u00a0 As with any high-risk strategy, one potential outcome is temporarily high returns.\u00a0 That’s what happened with Citigroup and a large slate of managers congratulated themselves with salaries ranging from $5-50 million per year (data on 2005 executive compensation<\/a>; article on current CEO’s $216 million in earnings over the last year<\/a>).<\/p>\n

Now the returns aren’t looking so good.\u00a0 The executives have paid off mortgages on their Park Avenue townhouses and their Nantucket beach houses.\u00a0 What about the average American taxpayer?\u00a0 Under the government’s latest scheme, he or she is going to cough up $20 billion immediately and potentially be stuck with another $306 billion in losses on crummy loans and securities\u00a0held by Citigroup\u00a0(nytimes story<\/a>).<\/p>\n

It would be tough to come up with a better example of socializing loss after the management of Citigroup privatized and pocketed gains.<\/p>\n

Perhaps it is time for a new approach.\u00a0 Wall Street executives exposed taxpayers to more than one trillion dollars in losses in order to help themselves to salaries in the $20-100 million per year range.\u00a0 It would have been a lot cheaper if we had\u00a0a policy where the CEO of any sufficiently large investment bank was paid $100 million per year direct from the U.S. Treasury.\u00a0 In return for this guaranteed payout, he or she would forgo any numbers-based compensation from the bank and therefore would have no incentives to take big risks whose consequences would ultimately fall on the taxpayers’ shoulders.<\/p>\n","protected":false},"excerpt":{"rendered":"

Citigroup took on a lot of risk earlier in this decade.\u00a0 As with any high-risk strategy, one potential outcome is temporarily high returns.\u00a0 That’s what happened with Citigroup […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"_jetpack_feature_clip_id":0,"_jetpack_memberships_contains_paid_content":false,"footnotes":"","jetpack_post_was_ever_published":false},"categories":[1],"tags":[],"class_list":["post-1135","post","type-post","status-publish","format-standard","hentry","category-uncategorized"],"yoast_head":"\nCitigroup Bailout: Socializing Loss after Privatizing Gains - Philip Greenspun\u2019s Weblog<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/philip.greenspun.com\/blog\/2008\/11\/24\/citigroup-bailout-socializing-loss-after-privatizing-gains\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Citigroup Bailout: Socializing Loss after Privatizing Gains - Philip Greenspun\u2019s Weblog\" \/>\n<meta property=\"og:description\" content=\"Citigroup took on a lot of risk earlier in this decade.\u00a0 As with any high-risk strategy, one potential outcome is temporarily high returns.\u00a0 That’s what happened with Citigroup […]\" \/>\n<meta property=\"og:url\" content=\"https:\/\/philip.greenspun.com\/blog\/2008\/11\/24\/citigroup-bailout-socializing-loss-after-privatizing-gains\/\" \/>\n<meta property=\"og:site_name\" content=\"Philip Greenspun\u2019s Weblog\" \/>\n<meta property=\"article:published_time\" content=\"2008-11-24T17:11:35+00:00\" \/>\n<meta name=\"author\" content=\"philg\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:label1\" content=\"Written by\" \/>\n\t<meta name=\"twitter:data1\" content=\"philg\" \/>\n\t<meta name=\"twitter:label2\" content=\"Est. reading time\" \/>\n\t<meta name=\"twitter:data2\" content=\"1 minute\" \/>\n<script type=\"application\/ld+json\" class=\"yoast-schema-graph\">{\"@context\":\"https:\\\/\\\/schema.org\",\"@graph\":[{\"@type\":\"Article\",\"@id\":\"https:\\\/\\\/philip.greenspun.com\\\/blog\\\/2008\\\/11\\\/24\\\/citigroup-bailout-socializing-loss-after-privatizing-gains\\\/#article\",\"isPartOf\":{\"@id\":\"https:\\\/\\\/philip.greenspun.com\\\/blog\\\/2008\\\/11\\\/24\\\/citigroup-bailout-socializing-loss-after-privatizing-gains\\\/\"},\"author\":{\"name\":\"philg\",\"@id\":\"https:\\\/\\\/philip.greenspun.com\\\/blog\\\/#\\\/schema\\\/person\\\/448e4e6a0ae9105741a06dcf62cee50e\"},\"headline\":\"Citigroup Bailout: Socializing Loss after Privatizing Gains\",\"datePublished\":\"2008-11-24T17:11:35+00:00\",\"mainEntityOfPage\":{\"@id\":\"https:\\\/\\\/philip.greenspun.com\\\/blog\\\/2008\\\/11\\\/24\\\/citigroup-bailout-socializing-loss-after-privatizing-gains\\\/\"},\"wordCount\":255,\"commentCount\":2,\"publisher\":{\"@id\":\"https:\\\/\\\/philip.greenspun.com\\\/blog\\\/#\\\/schema\\\/person\\\/448e4e6a0ae9105741a06dcf62cee50e\"},\"inLanguage\":\"en-US\",\"potentialAction\":[{\"@type\":\"CommentAction\",\"name\":\"Comment\",\"target\":[\"https:\\\/\\\/philip.greenspun.com\\\/blog\\\/2008\\\/11\\\/24\\\/citigroup-bailout-socializing-loss-after-privatizing-gains\\\/#respond\"]}]},{\"@type\":\"WebPage\",\"@id\":\"https:\\\/\\\/philip.greenspun.com\\\/blog\\\/2008\\\/11\\\/24\\\/citigroup-bailout-socializing-loss-after-privatizing-gains\\\/\",\"url\":\"https:\\\/\\\/philip.greenspun.com\\\/blog\\\/2008\\\/11\\\/24\\\/citigroup-bailout-socializing-loss-after-privatizing-gains\\\/\",\"name\":\"Citigroup Bailout: Socializing Loss after Privatizing Gains - 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