Hack the market

The New American Way: you pay, they profit

It’s not being characterized as such, but the bailout of Citi is really just a stealth tax on the citizenry of America.

~$1,000 for every man, woman and child in our country.

I saw the memo Pandit sent to his ebullient employees.  It’s filled with some quality verbiage, but my favorite part is where he characterizes this as an “innovative market-based solution”…

This is an innovative, market-based solution that allows us to purchase insurance from the Fed to limit future risk. And while the global economic challenges are still not over, this transaction brings even greater clarity to our overall financial strength and ability to deliver on the promise of this great institution.

The use of the word “purchased” is also pretty splendid.  This is just classic stuff from the head of a company that has engineered an absolutely historic destruction of value.

After the break you can see the remainder of this pristine example of doublespeak-as-modern-art.  I hope you find it funny … you’re paying for it.

From: Vikram Pandit
Sent: Mon Nov 24 03:15:07 2008
Subject: Today’s Announcement

Confidence is fundamental to the strength of the global financial markets. Any question of confidence must be addressed quickly and decisively. This weekend, the U.S. Government and Citi worked together in an unprecedented way and with great speed to address the speculation and rumors about Citi’s financial health, which led to recent stock market valuations that ignored the strong fundamentals of our global businesses.

I appreciate this speculation has fuelled difficult questions and concerns from clients, colleagues, business partners and shareholders. Despite these challenges, all of you have distinguished yourselves in staying focused on serving clients and I am proud of your professionalism and hard work. Citi is America’s bank around the world and our strength is viewed as an integral part of the overall strength of the U.S. financial system.

Tonight, we’ve taken an important step to dramatically reduce our future risk exposure and eliminate the lingering doubt in the market about Citi’s financial strength. We have reached an agreement with the U.S. Treasury, Federal Reserve and FDIC that adds $40 billion of capital and significantly strengthens Citi’s key capital ratios, liquidity and risk profile. I encourage you to review the press release, which provides details.

Our Board of Directors, which has approved this transaction, has also agreed to reduce the dividend to $0.01 for the next three years, which will maintain and further strengthen our solid capital position.

This is an innovative, market-based solution that allows us to purchase insurance from the Fed to limit future risk. And while the global economic challenges are still not over, this transaction brings even greater clarity to our overall financial strength and ability to deliver on the promise of this great institution.

I have no doubt that Citi has strong and stable operating income, unparalleled access to funding, extraordinary levels of liquidity and the best talent in the business. Continue to assure your clients and customers that our fundamentals are strong and our determination to find solutions to drive their financial success is unwavering.

Thank you again for demonstrating that even during the toughest of economic times, Citi never sleeps.