Citigroup Is on Its Fourth Government Bailout

The New York Times today has the fascinating story of the dissolution of the Rockrose real estate concern. Three brother of Iranian heritage grew from renovating a building in Greenwich Village to running one of the largest real estate businesses in New York. Yet all it took was a coin flip to split the holdings three ways. Henry Elghanayan, the eldest brother, was concerned for the succession rights of his son, Justin. So the brothers chose to split the company up ahead of any possible disputes. In doing so, they employed a sort of reverse game theory: The low bidder won the right to divide the firm’s holdings into three parcels each brother would select. But as the low bidder, he would choose last, hence, he had the incentive to draw up fair divisions. Henry won the right to the Rockrose name, but horse-trading among the brothers led to some interesting choices that none saw coming. The story is a fascinating tale of economic game theory as applied to a multibillion-dollar real estate company.

Citigroup (C) has been rescued four times by the U.S. government, the Times writes. As the quintessential “too big too fail” institution, the bank is in danger of becoming a caricature of its own maladies. The latest bailout includes $45 billion in TARP money plus $300 billion in FDIC guarantees. The story raises the question of what to do with a bank that is too big to fail but seemingly incapable of succeeding without government intervention. One of the tactics by CEO Vikram Pandit has been to practically undo the 1998 merger with Travelers Group, treating each asset pool as a separate business line. The second group of assets are businesses that CIti hopes to exit in time. Yet experts quoted in the article foresee little good for the bank. “Eventually what happens with Citigroup is the government is going to turn to the bondholders and say we can’t put any more money into this. You own the company now ,” one analyst told the paper.

States are likely to shape health reform, reports the Washington Post. As the health care plan in Congress is fleshed out, important decisions on opt-out clauses, benefits, and other major aspects are proposed to be left to the individual states. One economist said, "The plus side is that states are uniquely positioned to reflect the tastes of their residents and market conditions. Plus, we can really learn from the different approaches states take," he said. The downside "is that states can screw up and not meet ... minimum standards." In the example of Texas, given in the story, it can take months for residents to be enrolled in Medicaid. Overall, the article seems to be charting the politicization of health care issue, even in the context of solutions being proposed by the federal government.

The Supreme Court finds itself looking at issues of executive compensation, reports the Post, though not exactly in the Kenneth Feinberg way we have become accustomed to. The case revolves around mutual fund fees—whether companies are charging too much to clients who are “locked in” to their business. Yet the ruling could have an unmistakable impact on executive compensation practices throughout the financial services industry.

After years of underperformance, Texas Instruments has finally gotten religion and is revamping its executive structure and board, reports the Times. Shamrock, a money management firm that helped oust Michael Eisner from Disney (DIS), has taken the reins and is seeking to provide value to investors. Indeed, as the firm has won battles against management, “[p]eople are beginning to think like owners,” says Shamrock’s CEO.

Finally, the Times exaplains why Google (GOOG) doesn’t like its phone bills. A few weeks back, it was reported the firm’s Voice product was refusing to connect calls to certain rural phone numbers. It turns out those numbers aren’t Grandma's—they belong to adult entertainment firms and conference call Web sites eager to turn a profit on exorbitant connection fees. Google, which can end up, like any carrier, paying 10 times more to connect a rural number as opposed to a city one, has chosen to block about 100 phone numbers from connecting. It believes the numbers are less about communication and more a money-making scheme. “Grandma wouldn’t be on all day,” a Google lawyer told the paper.