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"Crisis at Citi" (Special Report, Sept. 9) and "Flawed financial giants" (Editorials) do not explain how Citigroup got in its mess in the first place: the Gramm-Leach-Bliley (GLB) Act of 1999, which allowed commercial banks to get into investment banking. This is important because Citigroup is not the result of that act but the cause of it.
The merger of Sandy Weill's Travelers Group and Citicorp to form Citigroup in 1998, the biggest U.S. corporate merger, was illegal under the Glass-Steagall Act of 1933 as well as the Bank Holding Company Act of 1956. Citigroup was not only successful in getting Alan Greenspan's Federal Reserve to grant an unprecedented two-year grace period in the hopes that Congress would change the law but also was the primary force behind the passage of the 1999 GLB that legalized this merger. Thus, while Weill may be the "architect" of that universal bank, it did not get constructed without building permits signed by the Fed's Greenspan, Congress, and the White House.
With all due respect to the doomsday "Citi analysts" cited in your story, I would think twice before betting against this banking company.
Kenneth H. Thomas
University of Pennsylvania
Am I reaching the wrong conclusions after reading "Crisis at Citi?" Citigroup's main problem right now seems to be harassment by New York State Attorney General Eliot Spitzer. A real pain, no doubt, but hardly insurmountable. Its Brazilian exposure reminds me of Mexican, Russian, and other emerging-market exposures quietly resolved in recent years. While CEO Sanford I. Weill is obsessed with good numbers, sometimes at great human cost, your article shows that results are being delivered. And Weill's Darwinian approach to management selection seems to have led to a world-class team capable of carrying on his work if he goes. If he stays, it's a plus. So the stock price reflects Wall Street's group think du jour? Maybe they would get better perspective if they took a walk in the desert, like Prince Alwaleed Bin Talal.
The "staggering 40.8% a year average" that Citigroup returned to its shareholders stopped in 1998, the year Citicorp merged with Travelers. As a longtime Citigroup shareholder, all I can say is that the "Weill premium" has been a great negative for this company and its shareholders.
Garry S. Sklar
Cedarhurst, N.Y. In "The smart fiscal policy that's needed now" (News: Analysis & Commentary, Sept. 2), Margaret Popper did not consider the beneficial impact of helping the states reduce their budget deficits. During economic downturns, states tend to balance their budgets by taking money away from infrastructure projects. So if half of the $100 billion stimulus she proposes can be given to states, it would provide as much bang for the buck as any other proposal from Popper, Alan S. Blinder, or David A. Wyss.
This should also have political appeal for incumbents during an election year since the states' budgets affect voters more directly.
University of Baltimore
Baltimore "Planet Starbucks" (Cover Story, Sept. 9) reports that Starbucks Corp., with 5,689 stores, is "hard-pressed to grind out new profits in a home market that is quickly becoming saturated." On the contrary, I think they have a long way to go. Look at McDonald's Corp., with 13,100 stores in U.S. and 30,100 worldwide. I think you can have at least four Starbucks for every McDonald's given that there are two Starbucks in my office high-rise alone.
Gary F. Magnuson
As an ex-barista in Starbucks' busiest store in Orlando, I'd like to set the record straight: There is no training for "partners" (employees) until they make a commitment to become management. New baristas are paid $6 an hour, are asked to work through breaks and lunches, and are not trained in customer service. Learning to use the complicated espresso machines is "baptism by fire." While I still regularly drink their brand, I despise their management style.
Orlando In trying to identify companies that are having trouble with their asset-backed securities (ABS) transactions, you've included a company that has faced nothing of the sort ("Everybody out of the risk pool?" Finance, Sept. 2). AmeriCredit Corp. has successfully completed nearly three dozen ABS transactions since 1994 and has issued almost $26 billion worth of automobile receivables-backed securities. Not a single one of those deals has ever been downgraded, nor have we ever defaulted on a securitization. You implied that we face trouble ahead--but failed to mention our record of positive results for our ABS investors. Including AmeriCredit in this story was completely inaccurate and unfair.
Daniel E. Berce, CFO