While watching someone's short position on CitiGroup lose any gains it could have made over the past few market days, the government steps in, bails them out with $20B, and all equity shareholders are freed from the all-to-certain bankruptcy stock value of 0. One might next ask the question, "why is the government so quick to bailout yet another financial institution when some of the "Great American Icons" are waiting patiently for their own slice of the cake(most likely German Chocolate)?" The debacle is a double edged sword of sorts due to the fact that Citi was involved with credit default swaps and has already received $25B from the government already. Hogwash at its finest. IS it a good company? No. William Smith of Smith Asset Management, who owns CitiGroup stock said, "you're seeing an inept management being rewarded by the U.S. Government." Isn't one of the investing points to believe in their management team?
On the other end of this argument, the US Government sent the automakers packing last week when they came and pleaded for a cash infusion. Do they have poor management? Yes. They. Do. Similar situation. Congress told them all to come back with a business plan for the next few years to prove this money isn't for staying afloat, somewhat makes sense, not entirely. Will congress be able to tell if the business plans are for viability purposes? Should we be looking out for our manufacturing sector? Yes. American manufacturing cannot crumble, even Obama understands that one. Automakers linked to 3 million jobs, banking industry linked to around 225k jobs. Which impacts the economy greater? Were the auto companies making risky investments that were not transparent such as mortgaged back securities? Not hardly. They were burdened with the high costs of American Labor, which made them less competitive on a global scale. Give cash to the companies who truly need it, in other words, let the shorts run free.
Correction: CitiGroup received over $300B over the weekend in extended backings. Automakers: $0USD
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