By James Kwak
I’ve already criticized Citigroup CEO Vikram Pandit’s testimony before the TARP Congressional Oversight Panel on Thursday, but there’s one thing I left out. Citigroup, like other banks not named Goldman Sachs, is attempting to cloak itself in a mantle of goodness. Pandit’s testimony included several bullet points discussing all the wonderful things that Citigroup is doing for ordinary Americans. For example: “In 2009, we provided $439.8 billion of new credit in the U.S., including approximately $80.5 billion in new mortgages and $80.1 billion in new credit card lending.”
There are two problems with these kinds of numbers. One is that I have no idea what to compare them to. I looked through Citigroup’s most recent financial supplement and was unable to find any numbers for “new credit,” let alone those numbers in particular. For a credit card, what does “new credit” mean? If I have no balance, and then I lose my job so I run up $20,000 on my Citi credit card, is that $20,000 in new credit? Or does new credit only include new cards issued? If so, how does it compare to credit taken away by closing people’s accounts or reducing their credit limits?
The second is that whatever Pandit says about “new credit,” it’s hard to argue that credit didn’t contract in 2009. For example, total consumer loans (p. 27) fell from $484 billion at the end of 2008 to $443 billion at the end of 2009, and total corporate loans fell from $218 billion to $177 billion, while money deposited with other banks (including the Federal Reserve) grew by $100 billion. Now, this is not all Citigroup’s fault. For one thing, they were overextended, so de-leveraging made sense from a balance sheet perspective, and for another there may have been a decline in demand for credit. But I’m still troubled by this attempt to pretend that Citi was fueling the economic recovery by stepping up lending.
Update: A friend who I believe has plenty of credit and no need for more writes in to say that the credit line on her Citibank credit card was just increased by $6,000, even though she never used more than one-third of her old credit line. She was wondering why until she realized that the $6,000 counts as “new credit” to Citi.