Last week Citigroup, the nation's largest financial services holding
company, trotted out one of its top executives, Robert Rubin, to spread
some soothing words about how to clean up the corporate scandals and
repair the sagging stock market.
Rubin's (and Citigroup's) message appeared as a lengthy op-ed in the
Washington Post under the headline "To Regain Confidence." As former
Secretary of Treasury in the Clinton Administration, Rubin commands a
following, particularly in the financial press so important to
Citigroup's vast empire.
The need for Citigroup to use Rubin to pose as an ally of reform became
obvious two days later when the Senate Permanent Subcommittee on
Investigations released hundreds of pages of documents that the
Subcommittee Chairman Carl Levin said proves that Citigroup and J. P.
Morgan Chase "knowingly assisted Enron Corporation in disguising debt by
structuring sham financing vehicles."
The scheme not only facilitated Enron's deception which cost investors
and employees hundreds of millions of dollars, but earned more than $200
million in fees for Citigroup and J. P. Morgan Chase.
Citigroup's Rubin didn't provide an inkling of his bank's complicity
in the Enron scandal when he penned his piece for the Washington Post.
But he may well have had Citigroup's secret involvement in mind when he
argued that "regulatory and legislative changes and enforcement should
be balanced and appropriate."
With the revelations pouring out of the Senate hearing, it is
understandable that Citigroup and its executives would be entering a
plea for "balanced and appropriate" enforcement-a light tap on the
At least one Senator at the hearing-Peter Fitzgerald of
Illinois--raised questions about how many of the current scandals could
be blamed on Congress' decision in 1999 to allow banks, insurance
companies and securities firms to merge and form giant financial
conglomerates such as Citigroup.
That question must have troubled both Citigroup and Rubin who played
such major roles in the enactment of the legislation-Rubin as Secretary
of the Treasury and Citigroup as the biggest beneficiary of the action.
Rubin left the Treasury in July of 1999 and Citigroup announced he had
been hired by the corporation on October 26-four days after the final
compromise was reached on the legislation.
In answering Senator Fitzgerald's question about the wisdom of the 1999
legislation which merged banks and securities firms, Lynn Turner, the
former chief accountant of the Securities and Exchange Commission, said
"securities firms and banking firms can't be working together, entering
into transactions together and using the security arm to try to get
That echoed what many of us warned the Congress about repeatedly when
the legislation was being hammered through by Rubin and Citigroup and
the biggest players in the financial industry. The lobbying, greased
with record campaign contributions from financial services corporations,
drowned out all warnings about the dangers now so apparent in Enron and
other corporate debacles.
For consumer and community organizations around the nation, the new
revelations about Citigroup should come as no surprise. Community
groups have been trying for years to get legislative and regulatory
action that would halt predatory lending and other deceptive practices
by Citigroup's affiliates.
Citigroup became the nation's largest predatory lender when it acquired
Associates First Capital in September 2000 and merged it with another
its subsidiaries, CitiFinancial Credit. Last year, the Federal Trade
Commission (FTC) filed lawsuit against Associates First Capital,
Citigroup and CitiFinancial Credit Company seeking an injunction against
unfair and deceptive lending practices.
Here is what Jodie Bernstein, director of FTC's Bureau of Consumer
Protection, had to say about the practices of the Citigroup affiliates:
"They hid essential information from consumers, misrepresented loan
terms, flipped loans and packed optional fees to raise the costs of the
loans. What had made the alleged practices more egregious is that they
primarily victimized consumers who were the most vulnerable-hard working
homeowners who had to borrow to meet emergency needs and often had no
other access to capital."
Last year, Citigroup paid $20 million to North Carolina customers of
Associates and $300,000 to the state to settle allegations that
consumers had been tricked into buying expensive and unneeded credit
life insurance as part of their mortgage loans. The New York Times
reported last fall that Citigroup had settled 200 lawsuits pertaining to
practices of Associates with at least
twice that number still pending in the courts.
But, these facts, like the funny money games now revealed in the Senate
hearings, were strangely missing in Robert Rubin's lengthy rendition in
the Washington Post about actions that were needed for the nation to
To paraphrase an old adage: Citigroup, heal thyself.
For information about what you can do to help create a Financial Consumers'
Association, visit (www.essential.org)