by Frank James
Responding to rising outrage over reports that it was going to take delivery of a $50 million, 12-passenger jet, Citigroup said this morning that it is canceling the jet order, period, end of story.
"We have no intent to take delivery of any new aircraft," was the statement from Michael Hanretta, a Citigroup spokesman.
This is, to put it politely, a full, 180-degree reversal. The company said Monday it would take delivery of the Dassault jet because it was actually reducing the size of its air fleet and the new jet would ultimately add efficiency to Air Citigroup.
Citigroup would also have to pay millions of dollars in penalties if it didn't accept the jet, the company said.
What's more, in an attempt (unsuccessful) to appease critics, Citigroup said it wasn't using any of $45 billion it received from the federal financial bailout for the jet.
All that may have been true. But it didn't solve the political problem the company was facing, with calls coming from Congress for the Treasury Department to force the financial giant to cancel the order. As President Barack Obama works overtime to get Congress on board with his new $825 billion economic stimulus plan, the last thing he needed dominating headlines was Citigroup's new $50 million plane.
As I wrote yesterday, Richard Parsons, Citigroup's near chairman, knows how politics works, having cut his political teeth as an aide to Gov. Nelson Rockefeller and being sought out by Republican and Democratic presidents to serve on high-profile committees and commissions.
Also the former chief executive of Time Warner, Parsons has a lot of experience cutting his losses. Ditching the aircraft deal probably wasn't a hard decision for him.
Top executives in the financial services and auto industries and any other sectors that receive taxpayer-funded federal bailouts need to get some political smarts and fast.
As was demonstrated last year when auto industry executives flew on private jets to beseech Congress for federal assistance to stave off bankruptcy, Congress and the public aren't in the mood for business as usual from these companies.
Their senior managements need to show in unmistakable ways that they "get it," that they too are expected to make significant sacrifices during the present economic downturn as tens of thousands of workers, including many of their own, are being laid off.
Worse for banking companies like Citigroup is that they are seen as having caused some of the current problems because of their failure to practice better risk management during the heady years of the credit boom. And they are being blamed for not doing enough to increase lending activity.
Those managements may not like the unaccustomed scrutiny they're under but they'll have to get over it if they don't want to spend even more hours being humiliated during congressional hearings. Going forward, they may want to ask themselves as they make decisions on mergers. jets, retreats, bonuses and interior decorating expenditures, "How will this look if it becomes the top headline on Google News?"
Comments
If Citigroup needs government help bailing itself out, then the next-to-the-last thing in the world it needs is a $50 million private jet (the LAST thing would be an $87,000 rug to decorate the CEO's office, like John Thain of Merrill Lynch).
.
Please understand that if these guys were flush and their companies were in no need of help, BY ALL MEANS -- they're welcome to buy whatever they think they should have, and mazel tov to them one and all. The MINUTE they decide they can't possibly stay in business without bailout money, though, they need to be cooperating and cutting costs on their own to make sure that they take ONLY what they really need and that their company is operating with a minimum of waste.
.
I hope that they're well-versed in French and Russian history just before their respective revolutions.
Posted by: Op109 | January 27, 2009 10:52 AM
Hope it sets an example for bailout spending.
Posted by: Inky | January 27, 2009 10:58 AM
Once they were caught with their hands in the cookie jar, then and only then, Citigroup decides to cancel the jet. The Wall St bankers are self-serving crooks and scondrels to the bitter end.
Is anyone so naive as to believe that Citigroup would have cancelled the order, had the jet purchase not be brought in the open.
Posted by: Continuum | January 27, 2009 11:22 AM
Continuum, I could not agree with you more. These genius pigs need to be put back out in the barnyard, where they belong.
Posted by: Xcellentform | January 27, 2009 11:53 AM
This is the proper use of the Presidency as the "bully pulpit," as opposed to getting up and calling half of America "terrorist sympathizers."
Posted by: Grandblvd03 | January 27, 2009 12:16 PM
Continuum, I could not agree with you more. These genius pigs need to be put back out in the barnyard, where they belong.
Posted by: Xcellentform | January 27, 2009 12:16 PM
Exactly right. They don't care. They only care that they got caught. Todays AP story about 9 out of 10 executive who received TARP money still have a job or weren't demoted. All of this while tens of thousands of people are laid off.
Also, still no move to go back and restrict executive compensation and perks for companies who got TARP money.
It's time to hold their feet to the fire NOW. Make it painful, You know , like the little people like us feel.
Posted by: Todd m | January 27, 2009 12:35 PM
They still don't get it! The former Merrill exec. was still opining yesterday that his excessive office renovations would have been perfectly acceptable if business was good. Whether business is good OR in the tank, the criteria for the expenditure of funds never changes. You don't spend other people's money (shareholders-bondholders etc.) based on the present state of the business. ALL expenses should be subjected to rigorous examination ALL the time. That is only good business for crying out loud. The sense of "entitlement" which has developed at this level of corporate management, with their "lapdog" boards of directors full knowledge and approval as they pocket their own excessive salaries/fees/perks, is really astounding. THEY NEED TO REMEMBER WHOSE MONEY THEY ARE HANDLING AND THEIR ATTENDING FIDUCIARY RESPONSIBILITY. THEIR ACTIONS AND MINDSET CLEARLY BORDER ON CRIMINAL FRAUD!
Posted by: FER | January 27, 2009 12:54 PM
I don't understand all the holerin' over this or the bailout. Don't the republicans favor trickle down? Those CEOs and wealthy type should do well so they can trickle on us with their good fortune. When did this change?
Posted by: bill r. | January 27, 2009 3:46 PM
They should have bought the damned bird and painted it green. No, I don't mean spraying the actual plane, I mean the announcement. Something like "this is part of a long-range plan to reduce the size of our fleet, using more fuel-efficient aircraft with the latest noise-control technologies" etc. Combined with the termination penalty, there is a very good chance that the purchase makes sense.
They should have bought the damned bird and painted it green. No, I don't mean spraying the actual plane, I mean the announcement. Something like "this is part of a long-range plan to reduce the size of our fleet, using more fuel-efficient aircraft with the latest noise-control technologies" and "we have been evaluating our actual needs and have determined that this aircraft allows a significantly more efficient use of resources" etc. Combined with the termination penalty, there is a very good chance that the purchase makes sense.
Van
Posted by: G. Armour Van Horn | January 27, 2009 4:38 PM
People, there are still businesses out there making money. They reinvest their profits wisely in infrastructure and personnel and make sure that their people are included in the bonuses. The bosses of those companies don't take more than is responsible for salaries. I think before these greedy people get one more cent, they take a lesson from responsible business people and learn how a business is supposed to run.
Posted by: lochnessmonster | January 27, 2009 4:49 PM
Maybe the plan was to airdrop loan forms over the areas hardest hit by the credit crunch.
Naaaaah....
Posted by: Kenny Bunkport ✌ | January 27, 2009 9:04 PM
PANDIT: GIMME A TICKET FOR AN AEROPLANE
(Gimme a Ticket for an Airplane, Don Williams)
WilliamBanzai7
Gimme a ticket for an aeroplane
I ain't allowed to buy a new French jet plane
Oh the good ol days are gone I'm a goin' coach
Tim Geitner jus' wrote me a letter
I don't care how much airport time I gotta spend
I got to go back to be bailed out once again
Oh the good ol' days are gone I'm a goin' slow
Tim Geitner jus' wrote me a letter
Well he wrote me a letter
Said he could live with one less Wall Street bailout whore
Listen mister can't you see
I gotta go back to get bailed once more
Any way yeah
Gimme a ticket for an aeroplane
I ain't allowed to buy a new French jet plane
Oh the good ol' days are gone I'm a goin' coach
Tim Geitner jus' wrote me a letter
Well he wrote me a letter
Said he could live with one less Wall Street bailout whore
Listen mister can't you see
I gotta go back to get bailed once more
Any way yeah
Posted by: williambanzai7 | January 28, 2009 6:02 AM