AMLO outside the Senate, Monday, October 26

Worker's Party Deputy Mario di Costanzo Tears Apart Carstens Economic Plan

Sunday, December 14, 2008

Banamex and Citigroup: The Great Double Swindle

1. Beginning in 1995, the Mexican government bailed out the recently-privatized Banamex (Banco Nacional de México, italics obviously mine) to the tune of 79 billion pesos (seven and a half billion dollars) - a total which ascended over time to 104 billion pesos (ten billion dollars) in real value - as part of the giant Fobaproa bank bailout. Fobaproa, the costs of which were subsquently transferred to the Mexican taxpayer, saved Banamex from certain bankruptcy.

2. In 1998, the Citigroup came into being, assisted by the repeal the following year of the Glass-Steagall Act, a New Deal era law separating deposit banking from investment banking. The chief promotor of the law's repeal was Robert Rubin, Bill Clinton's Treasury Secretary, soon to become a director and senior advisor at Citigroup.

3. In 2001, Banamex was sold to the Citigroup for 125 billion pesos (12 billion dollars). This was done via a stock-market transaction (tax free, in Mexico), allowing Banamex to avoid paying the 12 billion, 500 million pesos it would otherwise have owed.

4. Citibank had long been the Mexican elite's bank of choice for spiriting money, drug money included, safely out of the country. Most famously, Raul Salinas, brother of former president Carlos Salinas de Gortari, laundered $80-$100 million dollars through Citibank to Swiss accounts.

5. In 2007, Banamex bought the airline Areomexico with just a fraction of the Fobaproa monies it continued receiving as late as 2006. The buy, moreover, was a steal: a mere $249 million dollars, barely the price of one new airplane. Bidding for the airline was prematurely cut off, preventing other bidders from getting involved and the price from going any higher. This transaction was widely seen as a payoff by Felipe Calderon to Roberto Hernandez, ex-director of Banamex and current member of the boards of both Banamex AND Citibank (and Televisa, for that matter), for favors received during the presidential campaign of 2006.

6. In November, 2008, the US Government announced that it was bailing out the Citigroup as part of the $700 billion bailout passed the month before. This includes the direct injection of capital as well as a government guarantee of $300 billion dollars of Citibank assets. The government further guaranteed to protect Citigroup against future losses over and above the first $29 billion. This despite a New York Times exposé (see: that shows that the Citigroup, through lax oversight and mismanagement, has only itself to blame for, among other things, getting over-involved in collateralized debt obligations (C.D.O.'s): bundles of sub-prime mortgages and other bad debt, as it turned out.

7. Robert Rubin, who was involved in this Citigroup strategy from start to finish, is now a key economic advisor to President-Elect Barrack Obama. He is unapologetic about his stint at Citibank, which has lost 70% of its shareholders' value this year and, in the same week as its bailout became news, announced 52,000 more layoffs, the "second largest job cut ever undertaken by any company on record" as Crain's new york reports.

Conclusion: the Mexican taxpayer bails out a previously-privatized asset that is then sold to an American banking group without the payment of a dime in taxes. Said group uses a fraction of that money to buy one of Mexico's privatized airlines in a pre-arranged, favor-swapping firesale as well as to engage in risky investment practices which lead it to the point of collapse. Not to fear, for where the Mexican taxpayer leaves off, the American taxpayer comes in, allowing Banamex-Citibank, in the space of little over a decade, to benefit from massive bailouts on both sides of the Rio Grande. Who says globalization ain't great?

No comments: