Citigroup Begging for Another Handout

Usually I don't make two postings in a single day unless something manages to rise to such a level of stupidity that it stands out like Rudolf the Reindeer's nose. Today happens to be one of those occasions.

According to a story reported by Eric Dash and Gretchen Morgenson and posted on the New York Times' web site, both the Treasury Department and the Federal Reserve Board are holding talks aimed at further support for financial giant Citigroup.

Under the reported proposal, the federal government would extend additional financial guarantees to Citigroup if its losses related to its heavy investments in "toxic" mortgage-backed securities were to exceed certain undisclosed levels. If the government were to cover such losses, it would receive an additional stake in Citigroup over and above the preferred stock it received in last month's $25 billion equity purchase.

Should this plan become approved it could serve as a model for similar actions at other banks and signal yet another shift in the government's evolving financial rescue of the nation's banking system. Under the original plan the Treasury Department, in a display of "leadership," was to have purchased so-called "troubled assets" from banks but suddenly reversed its course and instead began infusing capital directly into financial institutions in exchange for partial government ownership.

And therein, as the Bard of Avon said, lies the rub. The only problem is that this bailout thing is rapidly becoming a case of total-body road rash on the body politic!

First of all, using the words "leadership" and "Treasury Department" in the same sentence has become such an oxymoron that it rivals the similar use of "compassion" and "Josef Stalin." As I recently noted, Secretary of the Treasury Hank Paulson has about as much credibility as a ringside announcer on the World Wrestling Federation's Wrestlemania pay-per-view and even that little credibility is shrinking fast.

The situation down the street from the Treasury Department at the Federal Reserve's Board of Governors is slightly more consistent.

Prior to his selection as President of the Fed, Ben Bernanke had a distinguished academic career where he had devoted his life's work to understanding the factors that brought about the Great Depression of the 1930s. Dr. Bernanke holds the once-heretical opinion that it was the Federal Reserve's "tightening" of the nation's money supply between 1930 and 1932 that turned what should have been a recession into an international depression.

In the current financial crisis Chairman Bernanke has remained true to his beliefs and has "put your money where his mouth is" by "loosening" the Fed's monetary policies in order to prevent a recurrence of the collapse of 1929-1932. Unfortunately, unless you happen to be a banker with a few good Washington lobbyists, Bernanke has been so successful at loosening the money supply that he has removed the screws, wing nuts, and most of the common sense from the Fed's policy and dumped the incriminating evidence into the Potomac River.

Let's step back and, as WC Fields said,"Take the bull by the tail and face the situation."

As of today the major banks have been given around $200 billion to increase their equity which, in turn, was supposed to encourage these banks to increase lending money to everyone else. But, according to practically every financial news service, these banks are either sitting on that money or are using it for anything

but lending. Now Citigroup, which was already on the receiving end of a $25 billion spitball made from the taxpayers' money, is asking for even more billions of dollars in handouts.

Am I missing something here?

Everett Dirksen once said that "A billion here, a billion there, and pretty soon you're talking about real money." The late Senator from Illinois was right on target with that statement.

Isn't it time for a little real leadership in Washington? Or even a little more common sense?