Although it may be hard for some to swallow, the federal bailout of Citigroup was necessary. New York City and the nation already are in dire straits; another collapse surely would have left thousands more workers on the street at a time when job prospects are, to say the least, terribly lean.
It goes without saying that New York has been especially hard hit in this historic catastrophe. The failures of Bear Stearns and Lehman Brothers were horrific; the job contractions in what’s left of the financial industry have been awful. Jobs by the tens of thousands have vanished in the city and surrounding suburbs. Citigroup’s demise might have sent the entire region into a real and profound economic depression. Our city depends on the financial service sector for jobs, tax revenues and indirect impact on related businesses.
There is little question that mistakes were made at Citigroup. The Federal Reserve criticized Citigroup several months ago for not paying closer attention to its risk exposure, but the warning went unheeded. Congress now has every right to demand an explanation from Citigroup executives, including former Treasury Secretary Robert Rubin, a director and top adviser. But this is not the time to point fingers. This is the time to right the ship and get it moving again.
The story at Citigroup is familiar by now. Executives turned a blind eye to the very real downside of the investments they made in bad mortgages. Profits were too easy to come by, and nobody wanted to spoil the party.
The party’s over now. A thousand voices tell us that they saw this coming; another thousand can hardly contain their populist delight over capitalism’s distress. That’s to be expected
For those of us more interested in solutions, Washington’s decision to come to Citigroup’s aid is good news. Citigroup employs 300,000 people around the world, and while that’s about 75,000 fewer than a year ago, it is still a formidable figure. Washington’s plan to plow another $20 billion into Citibank and help cover its huge exposure to toxic assets surely is a bitter pill for U.S. taxpayers. But the bank’s collapse could very well have led to an even worse result.
The global financial crisis has inspired governments around the world to do things they’d rather not do, like come to the rescue of industries, like finance, that lived very well indeed during the good times. New Yorkers who have been thrown out of work or who are struggling to pay their bill perhaps have little sympathy for bankers and financiers. That’s understandable, but they must be shown that the alternative—letting banks collapse and industries die—will bring no justice, and serves no one. New York has been and will continue to be one of the world’s financial hubs, and being the home to major banks is a key element in our city’s future.
