Dastardly Citi
Citigroup Headquarters in New York
Citi announced today that it was going to run a new mortgage program. If you become unemployed and have your mortgage through CitiMortgage, you could have your payment reduced to $500 a month for 3 months. Not a bad deal, figuring $500 will get you into a rough apartment in most places across the country. And if after 3 months and you are still out of work, then they can consider continuing it or modifying your mortgage, on a case-by-case basis. The best part being when you find a job, you may also qualify for having your mortgage modified as well.
Now as much as I dislike Citi, this is a great idea. My question is, why couldn’t have someone thought of this a long time ago! At least in 2007, when the alarm bells were going off, the foreclosure rate was creeping up, and the economy was preparing us for this 15 month long (as of now) recession. Do you know how many problems we may have averted! It’s not pandora’s box by a long shot, but is definitely a critical piece of the puzzle that has been missing for a long time.
So if I like this plan so much, why am I criticizing Citi? Because I don’t question the plan, I question the motive. They have been bailed out 3 times by the government, and still may not make it. If my math is right, they are up to $70 billion, or Bank of America’s and JPMorgan Chase’s combined bailout. Given the fact that Citi is smaller than both of those two, it leaves you scratching your head.
I believe there are 2 primary reasons why this has been done. A) To save some face with the public, and B) the public now countrols 36% of Citi. Whose in charge now? Not because someone had a dirty concious, not because someone got smart and figured out nailing it to the guy in need is not going to solve the problem.
All in all, it is a step in the right direction. Too little to late to stem the crisis, but it may soften the blow. Hopefully other banks will move in the same direction. I know they currently offer “mortgage insurance” that eliminates payments, yet when I’m already paying a PMI, I feel I should already be covered.
However, thinking back to Citi’s 3rd bailout (and AIG’s), I think we need to assert an unwritten rule of thumb. Let’s limit them to three. In fact, three is too much, but we’ve already done it so we are stuck with that number. If they need more than three, and are too big to fail, then the U.S. needs to nationalize (yes, I said nationalize), long enough to break up the various pieces and sell them off to investors and other banks, to reduce the recoil felt in the industry.
