Corporations take bailout money ... and run overseas

What are the big corporations receiving taxpayer bailouts doing with their money? In October, Facing South looked into the case of Wachovia, the failing banking giant that made an emergency loan to help Republicans just as it was being propped up by federal backing. In the piece below, Phil Mattera of the Dirt Diggers Digest looks at companies that take U.S. taxpayer money and then expand business abroad. While there's nothing wrong per se with global companies pursuing their overseas interests, it does raise questions about what corporate interests do with public support.

It was only about week ago that the Treasury Department, the Federal Reserve and the FDIC rushed to put together an emergency rescue packagefor Citigroup consisting of a $20 billion capital infusion andprotection against up to $306 billion in losses on the financialgiant's portfolio of mortgage-backed securities. This was in additionto an earlier $25 billion investment in Citi as part of the effort toprop up the country's largest banks.

Now comes the news that an arm of Citigroup agreedto pay $10 billion to buy a Spanish toll road operator called ItinereInfraestructuras SA. Funny, I don't recall Treasury Secretary HenryPaulson mentioning that the taxpayers were bailing out Citi so that itcould speculate in the foreign infrastructure privatization market.

This caused me to wonder what else major financial institutions havebeen doing with their federal infusions other than expanding credit forU.S. consumers and businesses. We already know about the way in whichsome banks have used their money from Uncle Sam to buy competitors andthe tendency of AIG executives to treat themselves to lavish retreatsat public expense, but is Citi the only recipient that is sending someof its money overseas?

To answer this question I started with the tally of bailout recipients maintained by ProPublica and searched for recent announcements by those companies. I found, for example:

* Bank of America ($25 billion received) gave noticeof its plan to exercise the remainder of its option to purchase sharesin China Construction Bank Corporation (CCB) from China SAFEInvestments Limited (Huijin). The purchase will increase B of A'sholdings in CCB from 10.8 percent to 19.1 percent. The cost was notreported.

* JP Morgan Chase ($25 billion) announcedan enhancement of its cash management and trade services in India,which represented part of a $1 billion plan to expand the bank'sworldwide cash management and treasury business.

* Bank of New York Mellon ($3 billion) announced that it had received a license to initiate banking operations in Mexico.

Under normal circumstances, such announcements would merit nocomment. But at a time when these institutions are receiving massiveamounts of taxpayer funds, they take on a new significance. While theinfusions of federal money were designed to expand the flow of creditin the United States, banks are using some of the funds to expand theirforeign operations and investments. They are taking our money andrunning overseas.

And all this is happening while an anonymous U.S. Senator has placed a holdon the nomination of Neil Barofsky to serve as the special inspectorgeneral for the bailout. Apparently, some parties don't want any closescrutiny of how hundreds of billions of dollars of public money arebeing bestowed on the financial sector by a federal government actinglike an overindulgent parent at Christmastime.

-- Phil Mattera

Phil Mattera is director of the Corporate Research Project. For more chronicles of corporate misbehavior, visit the Dirt Diggers Digest.