//Belt tightening at the top! At least all that bail-out $ is stimulating something worthwhile. Now if it can stimulate a little more noose tightening, maybe it won't be such a total waste.//
msnbc.msn.com
NEW YORK - Citigroup Inc , which received a massive taxpayer-funded rescue last year, canceled plans to buy a $50 million executive jet after news of the new plane drew rebukes from politicians.
The bank is under heavy pressure from regulators and elected officials after receiving $45 billion of capital from the U.S. government last year, including a $20 billion emergency infusion in November.
On Monday, Citigroup said it was going through with plans to buy a $50 million jet, which a person familiar with the matter said was a Dassault Falcon 7X. The bank said the new plane would cut its costs and it was financing the purchase by selling older jets.
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But on Tuesday, a spokesman said Citigroup has no intention of taking delivery of any new aircraft.
On Tuesday, CNBC said it has learned that the Treasury Department put pressure on Citi not to accept the plane. Citing sources, CNBC said someone in the department called the bank to express "disappointment" in Citi's original decision to take delivery. The call was said not to be from new Treasury Secretary Tim Geithner.
Citigroup had ordered the executive jet in 2005, and was scheduled to receive it later this year. The bank said on Monday that canceling the deal would force it to pay millions of dollars of penalties.
The jet quickly became a lightning rod of criticism. A White House spokesman said President Barack Obama does not believe "that's the best use of money" by companies receiving taxpayer assistance.
Sen. Carl Levin, a Michigan Democrat, pressed the Treasury Department to block the sale.
"To permit Citigroup to purchase a plush plane — foreign-built no less — while domestic auto companies are being required to sell off their jets is a ridiculous double standard," Levin said.
Not only is Citi not planning to take delivery of a new jet, it is also planning to cut the number of corporate jets in its existing fleet to two from five, according to a person familiar with situation, who asked not to be identified because the plans are not public.
Corporate jets have become a hot-button topic amid the ongoing credit crisis as the cost of owning and operating them has come into question, especially for companies receiving financial support from the government.
In November, executives of automakers Ford Motor Co., General Motors Corp. and Chrysler LLC were roundly criticized for flying on corporate jets to Washington to ask Congress for federal bailout money.
Citi has been among the hardest hit banks by rising loan defaults and souring investments, and been one of the biggest recipients of government support.
Amid the struggles, Citi has been working to streamline its operations and shed assets in an effort to regain profitability. The bank has posted five consecutive quarterly losses, including a fourth-quarter loss of $8.29 billion. |
