Submitted By Todd on November 24th at 9:43am
"You're seeing an inept management team being rewarded by the U.S. government," said William Smith, chief executive of Smith Asset Management in New York, which owns Citigroup stock.That's the reaction of one investor to the new government bailout of Citibank. How does the government, where the status quo is sustained indefinitely no matter how poorly it is run, go into businesses with similar problems and steer them toward success? Consider GM, which has been coasting on the power of it's size and market share for decades while being managed as if the free ride would never end - in short, GM has been acting like it is the government, not like an organization that must be well run to survive. Citibank has already received $25 billion, and now it's getting another $20 billion while the government takes responsibility for $300 billion in stupid loans.
Chief Executive Vikram Pandit and other top management will keep their jobs despite the intervention, but the government will have the final say on executive pay packages. More details on compensation may come next week, government officials said.Will failed management at the Big Three be similarly propped up by government bailouts? Does anyone remember that Citigroup, in a deal organized by the FDIC, came within inches of being the savior of Wachovia just a few weeks ago? Democrats will be overseeing things as we get universal healthcare, universal banking, universal auto makers, and lord knows what else. Will we survive the cures, or will we just become a failout nation?