The government is handing even more money to Citigroup and the NYT is doing its best to cover up. The NYT reports on the fact that the government's preferred shares in Citigroup are being converted to common shares at a price of $5 per share, more than twice the market price.
The article describes this move as, "giving taxpayers more risk, but more potential for profit if the company recovers." This is extremely misleading. At the point of the transaction, the government is effectively losing half of its money, which had already been invested at a return that was far below market rates.
At one point the article notes that the government holds controlling stakes in Fannie Mae, Freddie Mac, and AIG. It then tells readers that "none of those deals have turned out well," implying that government control has caused the losses at these institutions to be larger than they would have been otherwise.
It is unlikely that they would find any economists who would make this claim. All of these institutions had enormous losses locked in at the point where the government took them over. It is true that the Bush administration underestimated the size of these losses, but if the government's control has increased the losses at these institutions, it is not clear how.
I’m writing to you today with a sense of urgency that I haven’t felt since I began my journalism career. As executive editor of The American Prospect, I’ve witnessed firsthand how independent journalism serves as a crucial bulwark against the erosion of our democratic institutions. Today, that role is more vital than ever. Can you step up today and show your support?
The winds of authoritarianism are blowing stronger. We’re seeing alarming signs of a coordinated effort to silence critical voices and undermine the very foundations that support progressive causes. As Bob Kuttner presciently wrote in our August 2024 issue, a weaponized IRS could attack the very foundations of the progressive movement. We need readers to step up and help us dig in for the long haul.
We’re falling behind in our spring fundraising campaign, and with so much at stake we can’t afford to come up short. If you value fearless, independent journalism that holds the powerful accountable and defends democracy, now is the time to step up. The American Prospect depends on reader support to stay in the fight. Pitch in today and help us close the gap. Please consider making a donation today.
–David Dayen, Executive Editor
Copyright 2025 | The American Prospect, Inc. | All Rights Reserved