I am reaching the limits of my ability to stand more waste of our money. Today, I learned that Citigroup (NYSE: C) is taking delivery of a $50 million corporate jet from French manufacturer, Dassault. (For that kind of money, it could have at least bought from an American manufacturer).
I know the U.S. invested $45 billion worth of taxpayer money with no strings attached -- but is it really possible that Citi does not get that buying a corporate jet with that money is blazingly stupid?
There is some irony on this front. This evening Maria Bartiromo conducted an interview with John Thain who was deposed last week for various sins. Bartiromo was in Davos, but Thain was not -- although one of his sins was that he had accepted an invitation to attend Davos. But back in 2007 -- almost exactly two years ago -- it was Bartiromo who got in some hot water for taking Citi's corporate jet with then Citi-executive Todd Thomson.
I guess after Todd and Maria's trip, it was time for a new jet for Citi. But it's too bad that it took so long to get a new one. And that we taxpayers are footing the bill.
You might have thought that $45 billion was supposed to go for more loans to boost the economy. But at Citi, those are down 3.1%. I don't think a decline in lending was what was intended at all.
It looks like it has yet to sink in with Davos Man that times have changed. And if Citi actually takes delivery of that jet, CEO Vikram Pandit should follow Todd Thomson out the door.
Update. ABC News reports that Obama administration officials called Citi execs about the jet and told them to "fix it." And today Citi says: "We have no intent to take delivery of any new aircraft." I don't know if this means Citi will lease the aircraft instead of buying it. If it backs out of the contract, it may end up paying a penalty fee.
Peter Cohan is president of Peter S. Cohan & Associates. He also teaches management at Babson College and is the author of You Can't Order Change: Lessons from Jim McNerney's Turnaround at Boeing. He owns Citi shares.
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Reader Comments (Page 1 of 1)
1-26-2009 @ 8:49PM
Ann said...
Why does the government allow these CEO's of so many companies to spend our hard earned tax dollars as they please without being held legally responsible? Having a vested intested in this company, I am shocked and angry that they would spend $50 million dollars on a jet when stock holders lost so much. They need to be punished by law. We, the people have had enough!!! Blog everyone. How do we stop this ??????
1-26-2009 @ 9:33PM
Rod said...
What is up with our government that they are not calling this man down to Washington DC immediately! After the way they dressed down the big three, HOW DARE THEY NOT HOLD CITI ACCOUNTABLE. This just shows how bought and paid for that our government is. Put an end to the lobbyists!
1-26-2009 @ 9:59PM
Philip C said...
Here we go again these guys don't get it. I am sick and tired of my money yes that's right my money being spent on the Fat and yes I mean Fat Cats again. We need to stop this now. If this practice it's not being stopped then someone is getting paid off big time. I feel for the person losing their house they sure could use that money a lot more than someone who cannot take a Southwest flight. Come on Congress do something you are looking like a bunch of fools and you are only to blame.
1-26-2009 @ 10:57PM
Marshall said...
Isn't it possible that they ordered this plane a long time ago and couldn't cancel it? I don't know much about private jet manufacturers but I doubt there's a hangar full of $50 million planes that they went shopping in yesterday.
1-26-2009 @ 11:41PM
Karthik said...
Normally bail out packages will not solve any of the problem as it is hyped. www.askamarkettechnician.com
2-11-2009 @ 12:08PM
bobbie cornett said...
These executives at Citicorp and others like them should be jailed for the abuse of taxpayers' money. And for the public's money they wasted (on themselves) before these economical problems surfaced. I don't believe we yet understand that these people are responsible for more than just the money they stole. They have destroyed lives and families. They've caused people to commit suicide because of losing their jobs and investments. They should be investigated and prosecuted. They've proven they feel untouchable when they use our money to purchase a $50 million jet, and foreign at that. The U.S., president rides in a plane that is 20 years old. Who are these banks execs and wall street fat cats? How can they so freely flaunt their arrogance and riches while the rest of the world travail in financial agony?
1-27-2009 @ 10:51AM
Hollie said...
Just to play devil's advocate, it is conceivable that you have to spend money to make money? I don't know what it is that CEOs do on their private jets, but maybe it is useful for networking at that level. It is not especially interesting to see all of these rants that say "The CEO of AIG bought two Big Macs for lunch with my bailout money, instead of giving one to me, what a pig!" without giving any sort of context for the news in question.
1-27-2009 @ 10:52AM
william lindblad said...
The jet may be a contract that they could not renege on and, if so, just another nail in the executive coffin. Thain is the news and an example of all. He said he is sorry.
Being sorry for stupidity. Being sorry for greed. Being sorry for horrendous bad judgment solves nothing. What is needed is good competent leadership and the current group of executives throughout the entire banking industry displays none.
Before anything is going to change - They have to go. So do all others that fit this mold. We cannot have people being paid millions of dollars in salary that essentially run a business poorly. Sweeping changes have to be made. I would suggest that a law be passed that would require the boards of directors to actively monitor their associated business and it's executives. Failure to do so would make these individuals liable to civil/criminal actions - both as a group, and personal. With a large axe hanging over their heads they might pay attention.
1-27-2009 @ 12:37PM
Steve said...
Obama Officials Tells Citibank To Ditch Plans For $50 Million Private Jet
The high-flying execs at Citigroup caved under pressure from President Obama and decided today to abandon plans for a luxurious new $50 million corporate jet from France...
ABC News has learned that Monday officials of the Obama administration called Citigroup about the company's new $50 million corporate jet and told execs to "fix it."
http://tinyurl.com/ce9bgqpage=1
2-26-2009 @ 5:44PM
4tner said...
But it's O.K. for politicians to utilize jets with tax dollars right? How come that hasn't really been brought up as an issue? I understand that people are upset with this irresponsibility, but the negative publicity with corporate jets has had a consequence of many job losses for those who work in the aviation industry (manufacturers, pilots, technicians, repair stations and safety schools) not to mention job losses to hotel personnel, limo drivers and all of the other jobs created by people having the freedom to spend their money as they wish. Now all of these people are scared to spend anything because of the scrutiny, so guess who gets hurt most? The little guy!!!!