Here’s a story that resonates with so many layers of bitter irony that it’s hard to know where to begin. So we’ll start with the headline: “Citi Foundation to Help Teens Find ‘Pathways to Progress.‘”
Two other recent stories add a certain piquancy to this noble-sounding venture. One involved a settlement in which Citi agreed to pay more than $1 billion for charges that it defrauded investors in its mortgage-backed securities. In the other, Citi was the only one of 25 banks to fail a “stress test” for sound fiscal planning and capital management. (The test has been criticized by independent observers – for being too easy.)
Incompetent and morally compromised: Who better to help our young people build their future careers?
The “Citi” in question is, of course, Citigroup. That’s the too-big-to-fail enterprise which was created after Democrats and Republicans agreed to deregulate the banking industry, and after Clinton administration officials like Robert Rubin paved the way for its formation via merger. Citigroup has been grossly mismanaged, and has paid massive sums for other charges of fraud, under the leadership of (among others) the very same Robert Rubin.
This would be the same Citigroup that was bailed out by the American taxpayer, both directly with Troubled Asset Relief Program (TARP) funds and indirectly through the Federal Reserve.
The teens in question are America’s teenagers, whose employment prospects were gravely damaged by a financial crisis brought on in 2008 by … well, by Citigroup and some of its fellow institutions. As a result of Citi’s misdeeds and those of its peers, the percentage of Americans between the ages of 16 and 19 with jobs went from 45 percent in the year 2002 to 26 percent in 2011, the lowest rate of teenage employment in post-World War II America. (Source: Brookings Institution and Bureau of Labor Statistics)
Not that Citigroup is being especially generous. It has pledged $50 million to its “Pathways to Progress” effort. The funds will be paid out over three years, which averages out to $16,666,666 and change each year. By contrast, Citigroup reported earnings of $13.9 billion last year – money that it would not have made had it not been rescued by the American taxpayer.
The annual cost of this program, which has brought the bank millions of dollars in free publicity, comes to roughly 1/834th of its earnings. And even that’s overstating Citi’s generosity. Tax breaks mean that American taxpayers are likely to wind up footing (and this is a rough guess) between $10 and $20 million of the total tab.
What will we get for our money? Citi’s press release quotes the institution’s CEO, Michael Corbat, as saying: “If we want a strong labor force for generations to come, we need to make sure our country’s youth are prepared to meet the evolving needs of employers.”
In other words, this is not entirely an altruistic venture. This partially tax-subsidized initiative, which we are told will involve “government officials” as well as community groups and Citi volunteers, will also serve as something of an outsourced employee training program for industries like Citigroup’s.
Nor will the scope of this project substantially address the youth unemployment problem. Employment figures have not changed substantially since last July, when a study from the Center for American Progress showed that there were more than 10 million unemployed youth in the United States. (The official unemployment figures that month for 16-19 year-olds and 20-24 year olds were 22.5 percent and 12.5 percent, respectively. Today they are 20.1 percent and 12.2 percent.)
With unemployment at or near the 10 million mark, the 100,000 young people targeted for this program is hardly a significant figure.
And if it seems we’re being too hard on Citigroup, consider its record. That $1.13 billion fraud settlement isn’t the whole story. There was also the whistleblower who wrote a memo to senior management, including Rubin, explaining that more than half of Citigroup’s mortgages – which it bundled and sold to investors – were “defective.” Richard Bowen notified Rubin and others that “Subprime mortgage pools, many over $300 million, were purchased even though the minimum credit-policy-required-criteria was not met.”
And then there was the whistleblower who offered a description of the ways in which Citi defrauded Fannie and Freddie – that is, the American taxpayer – not long after the institution paid a multimillion-dollar fine for defrauding the Federal Housing Administration.
And the $285 billion that Citigroup paid as a settlement for defrauding investors in mortgage-backed securities.
And the $110 million it paid in a settlement after improperly forcing borrowers to purchase overpriced homeowners’ insurance.
There’s more, but you get the gist.
Taxpayers gave Citigroup a $45 billion bailout, and underwrote the risk on $300 billion in flawed assets that the bank had acquired. Much has been made of the fact that the bank paid the $45 billion back. But if the U.S. had imposed anything like commercial profits on those loans – which couldn’t have been obtained from many commercial lender when the bank was such a bad risk – we would have billions more in the national treasury right now.
More to the point: If Citi and its peers hadn’t committed their fraud, America’s young people – along with millions of other Americans – wouldn’t need employment assistance today.
The bank and its executives got rich from fraud, malfeasance, and plain old lousy management. Now they want our thanks – and some tax deductions – for a program they say will help 100,000 kids.
It’s like some dark fiscal version of those MC Escher paintings where a stairway turns into a waterfall, then a flock of birds, then some clouds, and then back into a stairway. In this case a fraudulent bank helps destroy millions of jobs, taxpayers prop up the bank, the young people whose lives the bank ruined become its supposed beneficiaries, and then the taxpayers are supposed to be grateful to the bank.
Don’t stare at it too long or you’ll get a headache.
Will some of the programs funded by Pathways to Progress be good ones? Probably. But imagine what we could have done for America’s unemployed youth if we hadn’t devoted so much of our government’s resources to bailing out banks like Citigroup. And imagine how much better off our nation’s youth would be if banks like Citigroup hadn’t trashed the economy in the first place.