Too Big to Fail?

America wakes Monday morning to the news that one of it's biggest banks, Citigroup, is to be bailed out by the federal government. It's almost as if Treasury Secretary Paulson and Federal Reserve Chair Bernanke are operating a pinball machine. First, Uncle Sam was going to buy troubled assets from banks. Then they began putting money directly into these financial institutions. It seems neither strategy has helped Citigroup, whose stock has declined from $30 a share one year ago to $3.77 this past Friday.




It's said this financial behemoth is too big and too international to be allowed to die. Maybe so. Yet the government is guaranteeing about $306 billion dollars worth of toxic loans Citigroup put on its books. A legitimate question might be, how did that happen? After all, Citigroup always marketed itself as a pillar of the American banking system. As was the case with the first two bailout efforts, the taxpayers underpinning this government largesse will learn little or nothing about how all this came to be.

It's ironic in a way that Citigroup's headquarters is right here in New York. While a consensus has been reached that a bank is too big to be allowed to fail, our city's transit system has been calling for help. Those call have fallen on deaf ears. So while government can underwrite $306 billion dollars for a bank, when it comes to plugging a $1.2 billion dollar budget gap for New York's transit system, there's no money.

Well, not really. In this case, the money will be coming from the city's taxpayers in the form of a fare increase (maybe two). New Yorkers will also have to put up with more crowded trains due to decreased service, and severe cuts in bus service, in many cases to already underserved neighborhoods in Brooklyn, Queens, and the Bronx.

I'm sure there are financial experts who can explain why a bank gets so much sympathy while transit users in the nation's largest city are left to fend for themselves. To me, it's inexplicable.

And unacceptable. What do you think?