Geithner forces Citi to cancel jet order | Hacker News Reader

Geithner forces Citi to cancel jet order

ft.com

19 pointscondor28 comments

Anybody else see a problem with 1) the government propping up companies that should be reorganized by bankruptcy 2) taking over these zombie corporations like head crabs 3) and then interfering in all kinds of business decisions?

Air travel post 9-11 is ridiculous in this country. How Citi spends Citi's money is between Citi and Citi's shareholders. Except when the government intervenes.

Now we have a giant mess. Now every interference can be made in the "public interest." Why do employees get free coffee? Why do employees get gym memberships. What about education reimbursement?

What is in the "public interest" now?

I agree 100%, but supposedly the sky would have fallen if these companies would have gone bankrupt? (I have yet to be convinced of this)

From my understanding, there certainly would have been huge crack in the system had some of the big ones gone down just like that. This is because of the incest-like inter-connection between the major players; if one fails, it reneges on its derivative obligations, leaving several others' "naked" to risk. Those affected by this would have either lower credit rating or may not be able to fulfill their derivative obligations and so on.. domino effect. So, agreed, some of these biggies just had to be stopped from failing (AIG was the king of them) But what I fail to understand is that why is the government supporting these on an on-going basis? I would expect the government to strictly save them on the terms that they eventually wind down the operations or at least break up and sell to interested parties. It is very important for companies to fail every once in a while; in this special case the govt. should have helped soft-land their failure not prevented it!

It is far more offensive that Citi is still using tax dollars to pay its shareholder dividend.

This is why the terms should have been decided before, rather than after these loans were given.

Can you please provide some documentation for that? I'd be really interested in learning more!

I think it goes something like this:

The People paid taxes to the government for the bailout, Citi got some of that money, which allowed them to survive, which allowed them to pay dividends to its shareholders.

Therefore, Citi is using tax dollars to pay its shareholder dividend.

http://www.forbes.com/feeds/ap/2009/01/20/ap5943395.html

Since the government didn't insist on stricter terms, Citi is paying a 1 cent dividend. Blame the government for not negotiating stricter terms. If Citi didn't pay the max dividend it could under the terms, its shareholders could sue the board in a shareholder class-action suit for violating their fiduciary duty to maximize shareholder returns.

No, that bit about dividends can't possibly be right. Relatively few public companies pay a dividend, and basically none of the other companies face shareholder lawsuits about the absence of a dividend.

And if Citi were a poorly programmed automaton then it might make sense to avoid blaming its board for politically boneheaded moves; but its board is made up of directors who _ought_ to be spending some energy not pointlessly offending a public on whose dole they now find themselves. The shareholders will be (rightly) for more offended if the board so pisses off Treasury that the public assistance dries up.

I agree, however, that the (then-) government should have negotiated (decreed?) better terms for the bailout money.

>No, that bit about dividends can't possibly be right. Relatively few public companies pay a dividend, and basically none of the other companies face shareholder lawsuits about the absence of a dividend.

Relatively few public companies are in Citi's situation. I wasn't saying all public companies have to a pay a dividend or face a lawsuit. Supposing Citi is practically insolvent, it would be irresponsible (legally/fiduciarily, not morally) to shareholders not to try and launder out as a much money as possible. Once it is paid to shareholders as a dividend, creditors can't go after it.

Why must the shareholder get stuck holding the bag? It's not like they get special inside knowledge or treatment. We're punishing the people who bought Citi's story instead of the ones who ran it into the ground?

So you'd rather punish the US taxpayer, who very likely has no direct investment in the company (outside of index funds), and has nothing to gain if the company does well? Sure, it sucks for the shareholders, but that's exactly what they signed up for - a share of the companies returns in good times and bad.

Because they get compensated for the risk they are taking. Now if the shareholders want to sue or overthrow the management they have that right.

Because that's the point of being a shareholder. We're not punishing anyone. The real question is why should the government reward people who bought bad equities?

"That money should be used to lend to consumers to get the economy moving again"

Maybe the problem was they didn't write that on the back of the check when they made the deposit.

Maybe the problem is that Americans are already bursting at the seams from too much debt and no matter how far you stuff that firehose down the pig's throat it just can't hold any more.

So no matter how much CONgress wants the banks to lend, it just doesn't help.

The car companies that had to give up their jets aren't too happy about it either. And so goes nationalization.

http://www.freep.com/article/20090126/NEWS15/90126063/1001/N...

If it prompts you to log in, use this link: http://www.ft.com/cms/s/0/e4093646-eca6-11dd-a534-0000779fd2...

Looks like they were going to buy a Dassault Falcon. I wonder how these kinds of decisions will affect Aerospatiale/Dassault? It's not like they make a lot of them.. last year they made eight Falcons per month. They've already fired all their temps and cut back on subcontractors hours.

It just goes to show, you can't win for losing. One more notch in the economic death spiral.

While they're at it, make them fly economy class.

More accessible article: http://www.foxnews.com/politics/2009/01/27/citigroup-nixes-p...

As a taxpayer, I'm glad they canceled the order -- if it made business sense to do so. If it was just to look good (and they end up spending more money without the jet) then double bad on them.

As a pilot? A Falcon 6X? 5950 nautical mile range? 3 engines? Complete glass cockpit with lots of standby gear? Have you seen that cabin size? The possible configurations? Anybody like to have a private ride you could pick up in DC and get off in, say, Milan?

What were we talking about again?

Don't jet companies deserve 'stimulus' too?

While the theory of your comment makes complete sense to me, I do have a problem with French (and no offense to the French people here) companies getting my tax dollars. Last I checked (and I could be wrong) Aerospatiale-Dassault was a French company. If U.S. companies are going to be buying corporate jets with my tax dollars I would much rather they buy them from U.S. companies.

The French could equally well object to Dassault buying any components from American companies (such as engines from GE).

What a fine recipe for recovery: every nation for itself, make companies buy only what's politically-favored, reduce competition, reduce world trade.

(Those were all popular-but-misguided mistakes that made the 1930's depression deeper and longer.)

I think the misguided mistake was giving Citigroup too many tax dollars.

While I'm not in favor of the reducing-world-trade argument, I have a hard time with the idea that using tax dollars to buy expensive executive perqs and pay hefty year-end bonuses is going to help the economy recover.

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