I’ve got a bone to pick with the coverage this morning of Citigroup’s dismantling of itself.
Nowhere in Bloomberg, the Journal, or the Times is there the slightest nod to the fact that some of the key units the bank is selling off are the subprime meat grinders or otherwise shady firms that Sandy Weill built the empire out of. And while the stories mention that Citigroup’s size made it too unwieldy to manage, no one mentions that its size endangered the entire U.S. economy by being “too big to fail.” It would have been nice to have a graph or two about these major issues.
Here’s the Journal on the businesses Citi will unload:
A long list of additional Citigroup businesses is likely to eventually end up on the block, according to people familiar with the plans. They include two consumer-finance units, Primerica Financial Services and CitiFinancial. The company’s private-label credit-card businesses also are marked for disposal.
Funny, here’s the lede of a piece our pal Dean Starkman wrote more than a year ago:
A long time ago, before the turn of the century, subprime lending was a marginal business—economically, ethically, every way. The business was basically left to the hustlers. Financial carrion. Birds of prey.
Let’s face it, only the likes of Commercial Credit Corp., of Baltimore, would sell 40 percent loans to barely literate residents of Mississippi’s Noxubee and Lowndes* counties, tacking on credit insurance to bring the rate up to 70 percent. (Never mind what credit insurance is. Just don’t buy it.) Or maybe Primerica, of Atlanta, which Tennessee regulators accused of “seeking to deceive and confuse” customers through “a system of deliberate evasion.” Or maybe the truly rancid Associates First Capital Corp., of Irving, Texas, so corrupt that it employed a “designated forger,” an ex-employee told ABC’s Prime Time Live. I mean, who would go near a bunch like that?
Whoops! My bad. Sanford I. Weill, the former chairman and CEO of Citigroup Inc., Fortune’s third-most admired megabank last year, got his start buying Commercial Credit in 1986, then bought Primerica in 1988 before merging with Citicorp a decade later.
And Associates First Capital? Yup, Citi bought it in 2000. The Citi never sleeps.
Associates was so bad it had to be renamed and folded into CitiFinancial. Didn’t read anything about that in today’s coverage, though. That’s not surprising. We haven’t read much about this period. Dean’s piece made that point, noting that reporter Michael Hudson wrote a piece in 2003 exposing Citi’s subprime foundation in a small publication called Southern Exposure (read The Audit’s interview of Hudson last month here).
And I’ve given up on reading good reporting or analysis on the “too big to fail” problem. The pieces today report that the government is prodding Citi to break itself up but don’t say whether that’s because the government now realizes it’s bad to have entities that are so large that they know they can get into trouble and the taxpayers will come clean up their messes.
This is a critical issue and we really need some muckraking journalists to give it a look.