The Hindu : Opinion / Letters to the Editor : Citigroup bailout

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Wednesday, Nov 26, 2008
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Opinion - Letters to the Editor

Citigroup bailout

The U.S. government’s decision to bail out Citigroup by shouldering hundreds of billions of dollars in possible losses and by ploughing in $20 billion of new capital is no doubt a morale booster for the bank. The move will surely bolster confidence in the banking giant as well as the nation’s financial system. The collapse of a huge financial institution like Citigroup could have proved hazardous to the already fragile financial system.

Tarun Girdhar,

Chandigarh

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Regardless of the altruistic intentions behind the bailout of Citigroup and other financial institutions, the bailout amounts to condoning the mismanagement that caused their downfall in the first place. The institutions failed because their marketing strategy was flawed. As they marketed financial products, they got a good response with the help of rating agencies and analysts. They proceeded to maximise the gains in the short term, leading to ruin in the long term.

By bailing out such companies the U.S. government has sent the message that it will support them when they fail, whatever the reason. It is like supporting a teenager whose delinquency has created all-round misery. Anyone would say that it is bad parenting. Why should it be any different when it comes to business? The business should be allowed to correct itself. If it means closure of banks, so be it.

M.V. Achuthakrishnan,

Bangalore

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