The precious time of senior government officials must not be so precious. Federal agencies seem to be spending more and more time looking back on the financial crisis to see if it was handled properly, particularly by the Fed and Treasury. It is not enough that the country avoided a depression.

” Citigroup Inc.’s $301 billion of federal asset guarantees, extended by the U.S. last year to help save the bank from collapse, will be audited to calculate losses and determine whether taxpayers got a fair deal,” according to Bloomberg. The implication is that the government has no idea what assets it backed. If this is true, it is a legitimate criticism of the Citi bailout process.  But how much does it matter?

The decision to help Citi was not based strictly on whether the government got a good deal.

The entire financial industry was on the edge of failure when the Congress and Administration agreed that bailing out the industry was an absolute necessity. There were some dissenters,  but, looking back on the decision, it appears to have been sound. There will be legacy problems for years. Some banks will pay the government back and some already have. Taxpayers have made money on warrants from firms including Goldman Sachs (GS). Taxpayers may lose money on the guarantees and loans made to the weakest financial firms including Bank of America (BAC) and Citigroup (C). The bailout was not meant to be primarily a way to make money for the average citizen.

Once the investigation of the Citi guarantees is over the Treasury could recommend that the taxpayer should get more ownership in the bank. It is hard to say how that would work now that the deal is long done. Perhaps there could be an ownership “clawback” not unlike the one proposed for Wall St. pay packages for 2007 and 2008.

The audit may show a number of things, but one of them won’t be what would have happened if the government had let Citi fail.

Douglas A. McIntyre

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