The US Government may be up $11 billion on its direct stake in zombie bank Citigroup (C), but with such a huge level of ownership by the public, it’s only a matter of time before it comes to resemble a GSE rather than a real bank.
According to Bloomberg, Citigroup has recently added about 1400 employees to work on loan modifications. The mortgage business now has 10,000 employees again — the same number as it had pre-crisis, and pre-layoffs. The new loan mod infrastructure is in keeping with the President’s wishes to see banks put more effort into keeping people in their homes.
While banks have tried to drag their feet, Citigroup doesn’t has much choice. Regulators have (rightly) shown a willingness to fire executives at the company, and if the bank doesn’t volunteer itself enthusiastically every time the government asks something of the banking industry, then it will likely face more wrath. We have invested a lot of money into it.
So for now, the bank is becoming an organ of the government, tasked with carrying out the mission of the day. Let’s just call it Citi Mae, and make that more clear.
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