Needed: A Few Good Hangings

There's nothing like a public hanging to focus men's minds. We could use some real focus as it becomes obvious that someone forgot to tell Secretary Paulson that his duties as Secretary of Treasury are different from those he formerly owed as the Chairman and chief dealmaker of Goldman, Sachs.

Currently, Sec. Paulson is spending what seems to be every weekend spending our money rescuing the reputations of his friends and former associates. Among the latest, the Board of Directors at Citigroup. If there is anywhere a body of thirteen men and two women more expansively (and expensively!) touted in financial circles for less reason, I'm at a loss as to where they may be hidden.

These folks have not only bunked in the board room, asleep for years with the risk switch stuck in the on position, they've also actively conned us with a trillion dollar three-shell game where the taxpayer played the sucker and Paulson the shill.

According to The Wall Street Journal

Despite the unprecedented scope of the rescue plan, it's not clear whether it will be enough to stabilize Citigroup. The roughly $300 billion pool of assets that are included in the rescue plan represent only a sliver of the company's more than $3 trillion in assets, including its holdings in off-balance-sheet entities.

Jitters about such "hidden" assets helped trigger the nose-dive in Citigroup's stock last week. Among the off-balance-sheet assets are $667 billion in mortgage-related securities.

Citigroup has tried repeatedly to rid itself of its exposure to those assets -- and nearly hammered out a similar arrangement with the government nearly two months ago.

In late September, the company reached an agreement for a government-financed acquisition of Wachovia Corp. Under that planned deal, Citigroup and the government were going to divvy up the losses on $312 billion of assets, with Citigroup absorbing the first $30 billion in losses and the government shouldering the remainder.

Citigroup described that arrangement as intended to insulate it from Wachovia's risky mortgage assets. But Citigroup also would have been able to unload some of its own assets, according to people familiar with the matter.

So, the deal structured by Citi and officially blessed by the feds with the ostensible purpose of reducing the systemic risk to the market represented by Wachovia, then a victim of a silent run on the bank by its depositors, was actually a secret plan to slip Citi's hidden toxic pea into the pocket of the unsuspecting public. Little did we know then that the acquisition of Wachovia by white knight Wells, Fargo saved the day for the rest of us.

Now, Act II, where we awaken to the roar of the giant sucking sound of $300 billion or more being vacuumed out of the economy by the Paulson, lifted out of myriad more productive use by little banks, little businesses and little people for delivery to the money center moguls at 399 Park Avenue.

Is there shame?

Not. A. Bit.

Should there be shame? You bet!

The members of the Board at Citigroup should be ashamed to show their faces on the street. Their names and photos should ricochet through business history as the gang that couldn't handle the job of keeping the train on the track it had been riding for 100 years. Heck, John Luther (Casey) Jones is memorialized in song forever for less.

These people should be shunned by polite society. Their riches should not prevent their expulsion from the Harvard Club and Four Seasons restaurant.

Their negligence caused a catastrophic loss and then they tried to pawn it off on the rest of us.

Shameful.

We accepted it. Shameful, too.

In any further of these weekend wiggle-outs, the terms should be automatic and simultaneous with the deal.

• The entire board of directors should fired for cause. Not allowed to resign, but fired, on the spot.

• The shareholders should be zeroed out. Left with nothing. Nada.

• Every takeover should last no more than ten years, during which the company is to be shrunk in size until it is no larger than the median for its industry. Preferences for firms wishing to purchase the pieces to be spun off should go to those of median size or less.

This will reduce the moral hazard and will focus managements' attention on the need to avoid a rescue.

We need to immediately end the "too big to fail" strategy that is the hallmark of those who in their careers played only with the largest firms. Too often they distrust the disorderliness of the marketplace and prefer, much to our detriment, dealing only with those they know, the residents along Park Avenue, where every dandy is above average.

In a time where managements routine pay themselves bonuses for "saving the firm" by foisting on the American taxpayer, why would anyone think that the results tomorrow will be different from the results today?