I don’t recall seeing last week dire headline warnings about the near collapse of Citigroup and what it would do to the stumbling world economy. By Sunday, however, the word was the giant banking conglomerate was known to be in such dire straits that the Federal Reserve and US Treasury had decided — no Congress needed — a mammoth rescue plan was needed. To wit: $20 billion cash infusion, on top of the $25 billion received under TARP, AND a guarantee to back stop $300 billion in its gopher hole riddled loan portfolio, about which –true to form in these fiefdoms of capital– little is known.

Robert Reich has his opinions.

This is not a particularly good deal for American taxpayers, but it is a marvelous deal for Citi. In return for all the cash and guarantees they are giving away, taxpayers will get only $27 billion of preferred shares paying an 8 percent dividend. No other strings are attached. The senior executives of Citi, including those who have served at the highest levels in the US government, have done their jobs exceedingly well. The American public, including the media, have not the slightest clue what just happened.

Meanwhile, more than a million workers in the automobile industry, along with six million mortgagees, and a millions of Americans who depend on small businesses and retailers for paychecks, are getting nothing at all.

Ian Welsh at FiredogLake, too:

The rule here continues to be the same as it has been throughout this crisis: the people who caused the crisis must be left in charge of the organizations, the executive class running financial institutions must not be significantly harmed.

Because these folks are not competent, this is clearly the wrong decision, yet again. If they were capable of managing Citigroup properly, they would have done so. They didn’t because they aren’t able to do so. The correct decision is to simply nationalize the firm and replace the key executives. Then, in the case of Citigroup, which is too large to be effectively managed, it should be broken up.

I note that Citi was the bank the FDIC wanted to have take over Wachovia, instead of Wells Fargo. The FDIC was very insistent on that despite Wells Fargo making a far better offer and not needing government help. Citi now being in trouble proves what many of us noted then, that Citi was not the best candidate and that the FDIC’s insistence was very odd, raising questions of improper influence or incompetence.

One thing I am extremely curious about: what is the tax-paying record of these institutions we are bailing out? How much of their profits have been hidden away, off-shored, tax-accountant manipulated to disappear from the balance sheets and not be taxed?

Here’s a partial answer. More research to come.

Both Citigroup Inc. and Morgan Stanley used a financing structure that satisfies bank regulators concerned about their capital while also convincing federal-tax authorities that the interest payments they make to investors are actually tax-deductible interest on debt.

Here’s a 2006 report on Citigroups unhealthy existence in the world markets.

And a July, Bloomberg article on the $1.1 trillion of “assets” kept off the books by Citigroup, assets which, being a chimera have created the implosion, but which, being off the books, were likely never entered into the tax roles.

At an investor presentation in May, Citigroup Inc. Chief Executive Officer Vikram Pandit said shrinking the bank’s $2.2 trillion balance sheet, the biggest in the U.S., was a cornerstone of his turnaround plan.

Nowhere mentioned in the accompanying 66-page handout were the additional $1.1 trillion of assets that New York-based Citigroup keeps off its books: trusts to sell mortgage-backed securities, financing vehicles to issue short-term debt and collateralized debt obligations, or CDOs, to repackage bonds.

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