During the 2008 financial crisis, Citi was presented as the victim of events beyond its control—the larger financial panic, unforeseen economic disruptions, and a perfect
storm of credit expansion, private greed, and public incompetence. To save the
economy and keep the bank afloat, the government provided huge infusions of cash
through multiple bailouts that frustrated and angered the American public.
But, as financial experts James Freeman and Vern McKinley reveal, the 2008 crisis
was just one of many disasters Citi has experienced since its founding more than two
hundred years ago. In Borrowed Time, they reveal Citi’s history of instability and
government support. It’s not a story that either Citi or Washington wants told.
From its founding in 1812 and through much of its history the bank has been tied to
the federal government—a relationship that has benefited both. Many of its initial
stockholders had owned stock in the Bank of the United States, and its first president,
Samuel Osgood, had been a member of the Continental Congress and America’s first
Postmaster General. From its earliest years, Citi took massive risks that led to crisis.
But thanks to private investors, including John Jacob Astor, they survived throughout
the nineteenth century.
In the twentieth century, Senator Carter Glass blamed Citi CEO “Sunshine Charlie”
Mitchell for the 1929 stock market crash, and the bank was actually in violation of the
senator’s signature achievement, the Glass-Steagall law, in the late 1990s until then
U.S. Treasury Secretary Robert Rubin, engineered the law’s repeal. Rubin later
became the chairman of the executive committee of Citigroup, helping to oversee the
bank as it ramped up its increasing mortgage risks before the 2008 crash.
The scale of the financial panic of 2008 was not, as the media and experts claim,
unprecedented. As Borrowed Time shows, disasters have been relatively frequent
during the century of government-protected banking—especially at Citi.
About the Author
James Freeman has been the Wall Street Journal’s principal writer of unsigned editorials on Wall Street banking and regulation since the crisis of 2008. Under his own byline, he has published extended interviews with many of the most consequential people in finance, from the founder of the world’s largest hedge fund to the lead software developer of the Bitcoin project. He is a Fox News contributor and frequently appears on the Fox Business Network. He has also appeared on CNN, CNBC and MSNBC.
