Among the many revelations from the #PodestaEmails are passages showing that even before President Obama was elected, the staffing for leading cabinet positions had more or less been decided by a group led by an Citigroup exec.
The revelation came from a hack of the email account of John Podesta, a chair of Obama’s 2008 Transition Team. They show that Obama gave executives of Citigroup an “outsized role in shaping and staffing his first term.”
In an email dated from October 18, 2008, Michael Froman, who is now the US trade representative, used his official Citigroup email address of fromanm@citi.com, to send the following email to Obama advisers:
“Attached is the latest version of the Agency Review teams. It is a closely held document, so please treat it with the same sensitivity as ours. If you all could take a quick look at the lists for the agencies in your area, that would be helpful. I think the hope is that, while there are no guarantees, some of the people on these lists make their way into the agencies ultimately. Our role, therefore, is to check whether there is much overlap between the names here and the names were seeing/generating for sub-cabinet positions in each agency….”
In an earlier email, dated October 6, a month before the election, Froman provided Podesta with “Lists” attaching three documents: a list of women for top administration jobs, a list of non-white candidates, and a sample outline of 31 cabinet-level positions and who would fill them.
“The lists will continue to grow,” Froman wrote to Podesta, “but these are the names to date that seem to be coming up as recommended by various sources for senior levels jobs.”
The cabinet list ended up more or less as advised.
Janet Napolitano was listed as the choice for Homeland Security, Rahm Emanuel for chief of staff, Robert Gates for Defense, Eric Holder for the Justice Department or White House Counsel, Susan Rice for United States Ambassador to the UN and Arne Duncan for Education.
Hillary Clinton wasn’t mentioned, but John Kerry was listed for Secretary of State and for the Treasury, three possibilities were on the list: Robert Rubin, Larry Summers, and Timothy Geithner.
Froman had served in the Clinton administration and moved to Citigroup along with Clinton’s Treasury Secretary, Robert Rubin.
“It was Rubin who collected compensation of $126 million during his decade at the bank after helping deliver the repeal of the Glass-Steagall Act, legislation that had previously prevented Citigroup from owning an insured bank along with high-risk brokerage and investment banking,” according to Wall Street on Parade.
Obama appointed Froman to the position of US trade representative in 2013. Politico described how trade deals, like the TPP, are being deliberated under Froman.
“If you want to hear the details of the Trans-Pacific Partnership trade deal the Obama administration is hoping to pass, you’ve got to be a member of Congress, and you’ve got to go to classified briefings and leave your staff and cellphone at the door.”
To read the document, members are handed one section at a time, watched over while it's being read and forced to hand over any notes before leaving.
Another email dated five days after Obama won the 2008 election, an Obama adviser, Daniel Tarullo (now a member of the Federal Reserve Board of Governors) emailed Jack Lew, Citigroup’s Chief Operating Officer and sought his advice and that of Robert Rubin and Clinton’s former Treasury Secretary, Larry Summers, on whether Obama should attend a G20 Summit as president elect.
EXCERPT:
According to the official report from the Special Inspector General for TARP, here’s what happened next. On the morning of Thursday, November 20, 2008, Treasury Secretary Hank Paulson and New York Fed President Timothy Geithner held a conference call with Fed Chairman Ben Bernanke, FDIC Chair Sheila Bair, and Comptroller of the Currency John Dugan (a former bank lobbyist) to discuss Citigroup.
The next day, Friday, November 21, 2008, the New York Fed convened a conference call with Citigroup officials. During this conversation, the Fed reported that it became clear that liquidity pressures had reached crisis proportions. Again, the U.S. government report is simply confirming that Citigroup had no other options and the government was in a position to dictate the terms.
Instead, according to the report, the New York Fed “requested that Citigroup submit a proposal for additional Government assistance, without specifying the details of what Citigroup should include in the proposal.” This sounds very much like, “Just tell us what you want and we’ll oblige.”
Late on Sunday evening, November 23, 2008, after four days of what the Fed and Treasury refer to as “Citi Weekend,” the monster funding package was announced.
The government was going to guarantee a toxic asset pool at Citigroup up to $306 billion (later reduced to $301 billion). As a fee for this arrangement, Citigroup would give the government $7.059 billion in perpetual preferred shares, paying 8 percent annual dividends. And where would an insolvent bank get the funds to pay an 8 percent dividend; from another injection of $20 billion in cash from the government. The Fed also agreed to backstop residual risk in the asset pool through a non-recourse loan if necessary.
The Treasury was also to receive warrants to purchase 66,531,728 shares of common stock at a price of $10.61 per share. (Adjusting for the company’s 1 for 10 reverse stock split, Citigroup closed yesterday at $2.89 – a far distance from a warrant exercise price of $10.61.)
According to the Special Inspector General of TARP, he could find no “documentation of the decision-making process behind the $20 billion capital injection.”
The Treasury and the Fed knew exactly whose interests they were protecting. Just 11 months earlier, Citigroup had publicized a capital raising of $12.5 billion in convertible preferred stock in a private placement – meaning the full details were not released to the public. The press release said the investors included Saudi Prince Alwaleed bin Talal and Sandy Weill and the Weill Family Foundation.
Following press articles that ran the details in February of 2009, on June 9, 2009, the U.S. Treasury agreed to swap its $25 billion of preferred stock for 7.7 billion shares of common.
Common stock ranks at the very bottom of the chain in terms of claims on the assets of a failed institution. The government effectively put the taxpayer behind Citigroup’s creditors, bondholders, and its preferred stockholders. It gave up the taxpayers’ place in line as a preferred stock holder and sent the taxpayer to the back of the line. And, it gave up the 8 percent fixed income stream on the preferred.
But the plan to bail out the Saudi Prince, Sandy Weill and a select group of “private investors” is cryptically contained in this proxy statement dated June 18, 2009.
The private investors, who made their purchases on or around January 15, 2008 were going to be made whole on their $12.5 billion investment on or around March 18, 2009, despite the fact that Citigroup’s stock had fallen by 88 percent in that period of time. (Their preferred stock was convertible into common.)
I’ve been reading proxy statement for over 30 years. I have never read a more convoluted, tangled web of unnecessary complexity to arrive at the clear destination: private wealthy individuals were being made whole.
Link:
http://wallstreetonparade.com/2012/08/the-untold-story-of-the-bailout-of-citigroup/
