Will Citibank need another bailout?

The U.S. Government bailed out what's now Citigroup in the 1930s, the 1980s, and again in the current economic recession. The bank "enjoys an implicit Government guarantee," said Harvard Prof. Elizabeth Warren, in today's hearing by the Congressional Oversight Panel that monitors bailed-out banks, which Warren chairs. Will it need another bailout? she asked.

"I want to thank our government," Citigroup chairman Vikram Pandit told the Congressional Oversight Panel that monitors bailed-out banks today. He said the US Treasury has gotten back its $20 billion TARP investments, plus profits of over $8 billion in dividends and asset-guarantee fees. Still, "Americans still hold 27% of Citi's common stock" and guarantee billions in questionable Citi loan assets against loss. Pandit blamed weak government regulation, artificially low interest rates, falling home values and too many loans to people who couldn't pay them for the financial blow-up that brought a U.S. bailout. Pandit testimony here.

Citi now supports "effective, efficient and fair regulation,"  he added. "Banks should operate as banks, focused completely on serving their clients...We have publicly endorsed the general direction of financial regulatory reform under consideration by Congress," including a "systemic regulator", regulated "transparent" derivatives trading (the kind ex-Fed chair Alan Greenspan opposed), and a "resolution authority" that would close, not bail out, troubled banks. And he called for increased consumer protections, including the possibility of an independent regulator, which Obama wants but most banks oppose.

But Pandit stopped short of explicitly endorsing Obama's plan to stop banks from trading the same securities they buy for their clients -- a conflict of interest that's been ferociously defended by people at Goldman Sachs, Morgan Stanley and other big banks.

Citigroup is just trying to "curry favor" with its regulators and dominant shareholders, the U.S. government, complained panel member Paul Atkins, according to this Reuters story.

"I remain concerned that Citigroup's balance sheet remains vulnerable, that Citigroup is only intermittently profitable, and that there are continuing pressures on Citigroup to repeat the events of the bubble cycle...in the pursuit of unsustainable returns," warned AFL-CIO labor lawyer Damon Silvers, another panel member.