Sense on Cents

Did Citigroup just pull a fast one?

An issue impacting more Americans than their monthly mortgage payment is their monthly credit card payment. Obama has proposed legislation to limit banks’ ability to increase these rates. That legislation is not scheduled to be implemented until 2010.

In the interim, Obama is working on implementing a Consumer Financial Literacy Program to protect consumers from usurious type behaviors by financial institutions. An example of this behavior is reported by the Financial Times, Citi Raises Card Rates on Millions:

Citigroup has sharply increased interest rates on up to 15m US credit card accounts just months before curbs on such rises come into effect, in a move that could fuel political anger at the treatment of consumers by bailed-out banks.

People close to the situation said that Citi, which is about to cede a 34 per cent stake to the US government as part of its latest rescue, had upped rates on between 13m and 15m credit cards it co-brands with retailers such as Sears.

Read that again. Uncle Sam has a 34% stake in Citigroup. Suffice it to say without Uncle Sam’s bailout, Citigroup would be nonexistent. Uncle Sam is clearly the major shareholder in Citi. As such, management can not make any substantial decisions without Uncle Sam’s blessing. (more…)