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Citigroup’s plutonomy memos

Maybe I’m the last person who’s hearing about the Citigroup “plutonomy memos”, but they’re blowning me away.

Wait, now that I look around, I see that Yves Smith at Naked Capitalism posted about this on October 15, 2009, almost three years ago, and called for people to protest the annual meetings of the American Bankers Association. Man, that’s awesome.

So yeah, I’m a bit late.

But just in case  you didn’t hear about the plutonomy memos (h/t Nicholas Levis), which were featured on Michael Moore’s “Capitalism: a Love Story” as well, then you’ll have to read this post immediately and watch Bill Moyer’s clip at the end as well.

The basic story, if you’re still here, is that certain “global strategists” inside Citigroup drafted some advice about investing based on their observation that rich people have all the money and power. They even invented a new word for this, namely “plutonomy.” This excerpt from one of the three memos kind of sums it up:

We project that the plutonomies (the U.S., UK, and Canada) will likely see even more income inequality, disproportionately feeding off a further rise in the profit share in their economies, capitalist-friendly governments, more technology-driven productivity, and globalization… Since we think the plutonomy is here, is going to get stronger… It is a good time to switch out of stocks that sell to the masses and back to the plutonomy basket.

The lawyers for Citigroup keep trying to make people take down the memos, but they’re easy to find once you know to look for them. Just google it.

Nothing that surprising, economically speaking, except for maybe the fact that their reaction, far from being outrage, is something bordering on gleeful. But they aren’t totally complacent:

Low-end developed market labor might not have much economic power, but it does have equal voting power with the rich.

This equal voting power seems to be a pretty serious concern for their plans. They go on to say:

A third threat comes from the potential social backlash. To use Rawls-ian analysis, the invisible hand stops working. Perhaps one reason that societies allow plutonomy, is because enough of the electorate believe they have a chance of becoming a Pluto-participant. Why kill it off, if you can join it? In a sense this is the embodiment of the “American dream”. But if voters feel they cannot participate, they are more likely to divide up the wealth pie, rather than aspire to being truly rich.

Could the plutonomies die because the dream is dead, because enough of society does not believe they can participate? The answer is of course yes. But we suspect this is a threat more clearly felt during recessions, and periods of falling wealth, than when average citizens feel that they are better off. There are signs around the world that society is unhappy with plutonomy – judging by how tight electoral races are.

But as yet, there seems little political fight being born out on this battleground.

This explains to me why Occupy was treated the way it was by Bloomberg’s cops and the entrenched media like the New York Times (and nationally) – the idea that people are opting out and no longer believe they have a chance of being a Pluto-participant is essentially the most threatening thing they can think of. Interestingly, they also say this:

A related threat comes from the backlash to “Robber-barron” economies. The
population at large might still endorse the concept of plutonomy but feel they have lost out to unfair rules. In a sense, this backlash has been epitomized by the media coverage and actual prosecution of high-profile ex-CEOs who presided over financial misappropriation. This “backlash” seems to be something that comes with bull markets and their subsequent collapse. To this end, the cleaning up of business practice, by high-profile champions of fair play, might actually prolong plutonomy.

This is what Dodd-Frank has done, to some extent: a law that makes things seem like they’re getting better, or at least confuses people long enough so they lose their fighting spirit.

Finally, from the third memo:

➤ What could go wrong?
Beyond war, inflation, the end of the technology/productivity wave, and financial collapse, we think the most potent and short-term threat would be societies demanding a more ‘equitable’ share of wealth.

Note the perspective: what could go wrong. Lest we wonder who inititated class warfare.

Categories: #OWS, finance, rant

10 reasons to protest at Citigroup’s annual shareholder meeting tomorrow (#OWS)

The Alternative Banking group of #OWS is showing up bright and early tomorrow morning to protest at Citigroup’s annual shareholder meeting. Details are: we meet outside the Hilton Hotel, Sixth Avenue between 53rd and 54th Streets, tomorrow, April 24th, from 8-10 am. We’ve already made some signs (see below).

Here are ten reasons for you to join us.

1) The Glass-Steagall Act, which had protected the banking system since 1933, was repealed in order to allow Citibank and Traveler’s Insurance to merge.

In fact they merged before the act was even revoked, giving us a great way to date the moment when politicians started taking orders from bankers – at the time, President Bill Clinton publicly declared that “the Glass–Steagall law is no longer appropriate.”

2) The crimes Citi has committed have not been met with reasonable punishments.

From this Bloomberg article:

In its complaint against Citigroup, the SEC said the bank misled investors in a $1 billion fund that included assets the bank had projected would lose money. At the same time it was selling the fund to investors, Citigroup took a short position in many of the underlying assets, according to the agency.

The SEC only attempted to fine Citi $285 million, even though Citi’s customers lost on the order of $600 million from their fraud. Moreover, they were not required to admit wrongdoing. Judge Rakoff refused to sign off on the deal and it’s still pending. Citi is one of those banks that is simply too big to jail.

3) We’d like our pen back, Mr. Weill. Going back to repealing Glass-Steagall. Let’s take an excerpt from this article:

…at the signing ceremony of the Gramm-Leach-Bliley, aka the Glass Steagall repeal act, Clinton presented Weill with one of the pens he used to “fine-tune” Glass-Steagall out of existence, proclaiming, “Today what we are doing is modernizing the financial services industry, tearing down those antiquated laws and granting banks significant new authority.”

Weill has since decided that repealing Glass-Steagall was a mistake.

4) Do you remember the Plutonomy Memos? I wrote about them here. Here’s a tasty excerpt which helps us remember when the class war was started and by whom:

We project that the plutonomies (the U.S., UK, and Canada) will likely see even more income inequality, disproportionately feeding off a further rise in the profit share in their economies, capitalist-friendly governments, more technology-driven productivity, and globalization… Since we think the plutonomy is here, is going to get stronger… It is a good time to switch out of stocks that sell to the masses and back to the plutonomy basket.

5) Robert Rubin – enough said. To say just a wee bit more, let’s look at the Bloomberg Businessweek article, “Rethinking Robert Rubin”:

Rubinomics—his signature economic philosophy, in which the government balances the budget with a mix of tax increases and spending cuts, driving borrowing rates down—was the blueprint for an economy that scraped the sky. When it collapsed, due in part to bank-friendly policies that Rubin advocated, he made more than $100 million while others lost everything.

That $100 million was made at Citigroup, which was later bailed out because of bets Rubin helped them make. He has thus far shown no remorse.

6) The Revolving Door problems Citigroup has. Bill Moyers has a great article on the outrageous revolving door going straight from banks to the Treasury and the White House. What with Rubin and Lew, Citigroup seems pretty much a close second behind Goldman Sachs for this sport.

7) The bailout. Citigroup took $100 billion from the Fed at the height of the bailout in January 2009.

8) The bailout was actually for Citigroup. If you’ve read Sheila Bair’s book Bull by the Horns, you’ll see the bailout from her inside perspective. And it was this: that Citigroup was really the bank that needed it worst. That in fact, the whole bailout was a cover for funneling money to Citi.

9) The ongoing Fed dole. The bailout is still going on – and Citigroup is currently benefitting from the easy money that the Fed is offering, not to mention the $83 billion taxpayer subsidy. WTF?!

10) Lobbying for yet more favors. Citi spent $62 million from 2001 to 2010 on lobbying in Washington. What’s their return on that investment, do you think?

Join us tomorrow morning! Details here.

Citi_signs

Categories: #OWS, finance, rant
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