Amid Criticism, Citigroup Does U-Turn On Loans
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Citigroup has received some $45 billion in assistance from the federal government over the past few months. And now it's learning that all that money comes with some strings attached. The company is getting lots of criticism for how it spends its money. Last week, the company was forced to cancel an order for a new corporate jet after members of Congress complained. Now it is Citigroup's $400 million deal for naming rights to the New York Mets' new stadium.
NPR's Jim Zarroli reports.
JIM ZARROLI: When Citigroup got all that money from taxpayers last year, it had to agree to give the federal government shares of stock in return. When that happened, life changed for Citigroup. And the company is now taking some steps to adjust. Bart Narter is a banking analyst at the research firm Celent.
Mr. BART NARTER (Banking Analyst, Celent): I think it's a sign that they've heard the message. What's happening is, the banking business is gaining a new dimension, which is, you need to satisfy your shareholder, Uncle Sam.
ZARROLI: Today, Citigroup issued a report saying it would use $36 billion of the money it received for loans to businesses and consumers. And it promised to lend even more. Narter says the report is an attempt to respond to critics who say all of the banks, and not just Citigroup, haven't done enough to help thaw out the credit markets.
Mr. NARTER: This is another response to that, which is, look, you've given us money. We're not just sitting on it. We're lending it out like we're supposed to. See?
ZARROLI: Now the company is having to do battle on another front. Democratic congressman Dennis Kucinich of Ohio and Republican Ted Poe of Texas last week wrote a letter to the Obama administration. The letter criticized an agreement by Citigroup to acquire naming rights to the new Mets' stadium in Queens, which is to open this spring under the name Citi Field.
In exchange for plastering its name all over the stadium, Citigroup agreed to pay the team $20 million each year for 20 years. Mets' fan Chris Misoto(ph) says he liked the deal at first, but now that Citigroup is in so much trouble, he's not so sure.
Mr. CHRIS MISOTO: If it was a way to sign a better player to get an extra $10 million, $20 million a year, obviously I want the best team on the field, so I was okay with it. Or, you know, I'd deal with it at least. Now with the market situation, it's kind of a different question as far as the real answer.
ZARROLI: But it won't be easy for Citigroup to get out of the deal. The Mets issued a statement today saying they had been assured by the company that the deal will still go through, and Citigroup says it views the contract as legally binding.
But a Wall Street Journal article said the company is considering ways to back out of the arrangement. Anthony Sabino, professor of law at St. John's University, says the company would probably have to pay a break-up fee to get out of the deal, but he says it's worth it.
Professor ANTHONY SABINO (Law, St. John's University): It's simply not worth the firestorm of political criticism that's been leveled, and will continue to be leveled, at Citigroup until they resolve the situation.
ZARROLI: Citigroup insisted today that none of the federal bailout money it received will go to the new stadium or marketing. But Sabino is skeptical. He says money is fungible, and the funds that are going to the stadium would be better spent elsewhere.
Prof. SABINO: They're taking cash. They're paying the Mets organization for the naming rights. Okay, fine. That's cash that could be better used to keep jobs, make better loans and do a lot of other things. And the bottom line is having your name on a brand new stadium is about, on a list of 100 priorities, it's about 101.
ZARROLI: Sabino says that may be hard for the company to accept, but he says, like other big banks, Citigroup is now owned, in part, by taxpayers. And that means it's going to have to play by a different set of rules.
Jim Zarroli, NPR News, New York.