Courtesy of Pam Martens
New York Stock Exchange Trading Floor
Last Thursday the Securities and Exchange Commission (SEC) issued a statement regarding a new $10.5 million fine against Citigroup. The statement read: “Citigroup’s lax supervision and weak internal accounting controls allowed a handful of rogue traders to mismark positions over several years and, separately, resulted in the unnecessary loss of hundreds of millions of dollars of its shareholders’ assets to fraud.”
Lax supervision, weak accounting controls, and losing hundreds of millions of dollars to fraud are not words the American taxpayer wants to be reading about Citigroup in 2018. This is the very same bank that received the largest bailout by the U.S. taxpayer in global banking history following its implosion during the Wall Street crash of 2008 due to grossly faulty internal controls.
The reason that Citigroup was bailed out while Lehman Brothers was left to fail was that, according to FDIC records, Citigroup’s commercial bank, Citibank N.A., held $755 billion in deposits as of December 31, 2008. While more than half of that amount was foreign deposits which the United States had no obligation to repay, it would have destroyed trust in holding money in U.S. banks if the government had permitted Citigroup to go under. Today, Citibank N.A. holds just over $1 trillion in deposits, as of the latest report from the FDIC dated March 31, 2018, effectively still holding a gun to the taxpayers’ head.
Lehman Brothers also owned two Federally insured banks at the time of its bankruptcy filing on September 15, 2008 – Lehman Brothers Bank FSB and Lehman Brothers Commercial Bank. According to FDIC records, Lehman Brothers Bank FSB held $5.4 billion in deposits as of December 31, 2008 while Lehman Brothers Commercial Bank held $4.8 billion in deposits at year end 2008. Resolving two banks with a total of $10.2 billion in deposits is a far cry from attempting to resolve a bank with $755 billion in deposits.
Unfortunately for America, Citigroup has never meaningfully reformed the corrupt practices that led to its implosion in 2008. In fact, its conduct has gotten worse. In 2015, for the first time in its two centuries of existence, it was charged by the U.S. Justice Department with a criminal felony charge for its involvement in rigging foreign exchange trading, to which it pleaded guilty and was put on a three-year probation. The new charges from the SEC show that the traders misconduct and the misstatement of books and records occurred from 2013 to 2016 – well within the period of its probation. In other words, Citigroup cannot adequately police itself and continues to pose grave risk to the U.S. financial system.
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