Conservativism with a Socialist Twist

Or is it socialism with a conservative twist?

Most of the terms are relatively good for Citigroup and its existing shareholders. While the bank had to reduce its dividend to a penny, it is getting money from the government relatively cheaply. The preferred shares that the government is buying, for example, carry a relatively small 8 percent dividend payment and only slightly erode the value of shares held by existing investors.

Even though the American government can secure a nearly 8 percent stake, overtaking an Abu Dhabi investment fund and a Saudi prince as Citigroup’s largest shareholder, it will not have any seats on the board.

Other strings that the government attached are not onerous.

New limits on executive pay still leave Citigroup with room to maneuver, even though regulators must approve compensation. A required program to modify home mortgages is similar to an effort that Citigroup voluntarily announced earlier this month. [Emphasis added]

It’s hard to read this about the Citigroup bailout (Version 2.0) and not think the Bush-Paulson team has come up with a new brand of socialism, unique to American corporatist conservatism. The US Government now owns more of Citigroup than any other individual or entity in the world. But while the American taxpayer is watching their money rescue one of the biggest white collar corporations in America, they must also watch the government decline any control of the company they are seeking billion after billion into.

What a uniquely corporatist conservative position: Government will prop up major corporations and hold larger portions of these corporations than anyone else, but exert no control over how the company is run. Private benefit with no public accountability.

If anyone in the Bush cabinet or Obama transition team can look the American taxpayer straight in the eye and assure us that having no control in our stake in Citigroup is in America’s best interest, I’d be shocked. I’d also probably be lied to.

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