The Citi bailout plan is incredibly depressing -- another equity injection, and staggered responsibility for hundreds of billions of dollars in Citi assets. Not because the government didn't need to rescue the institutions, but because it seems to have been done with very little attention to the political optics, with very little transparency, and with very few restrictions on management and investors that could prevent taxpayer money from being abused. The future Obama Treasury team will hopefully approach these issues with a little more attention to all three of those criteria in mind. In the meantime, we can hope that not too much money will be lost on this little exercise.
The good news is that there were prohibitions on issuing dividends and a high interest rate on the government loan. The bad news is that there were no management changes, although Felix Salmon thinks CEO Vikram Pandit will be forced out by stockholders. See Robert Reich for more; it's also interesting to note that Bob Kuttner favorite Sheila Bair was apparently the prime mover behind the structuring of the Citi bailout.
--Tim Fernholz
