Yesterday I'm sure most have heard that Citigroup was about to buy a new corporate jet. Ellinorianne wrote a diary on it yesterday. The outrage grew because Citigroup accepted 45 billion dollars in TARP funds from our government.
ABC news reports that Citigroup has now canceled the order for the brand new French-built jet.
The decision came 24 hours after the banking giant, which was rescued by a $45 billion taxpayer lifeline, defended buying the state-of-the-art Dassault Falcon 7X -- one of nine to be flying in U.S. skies -- as a smart business deal.
The jet, the epitome of corporate prestige and privilege, can carry 12 passengers in elegant comfort.
ABC News has learned that on Monday officials of the Obama administration called Citigroup about the company's new $50 million corporate jet and told execs to "fix it."
Would the Bush administration have done that? No! Would a hypothetical fantasy-land McCain/Palin administration do that? No!
"The president said this during the transition, as it related to the auto companies using private jets: [He] doesn't believe that's the best use of money at this point," Gibbs said.
The company today issued a statement saying, "We have no intent to take delivery of any new aircraft."
Even if you didn't vote for President Obama there is no way you can argue we're better off with McCain/Palin (Bush people) in charge. The relationship of Citigroup to the GOP is analogous to the relationship of a weak parent to a spoiled child. The child does anything he wants and gets whatever he wants. Thank God responsible parents are in charge.
UPDATE: CNN is reporting that Sen. Carl Levin (D-MI) also pressured the Treasury Dept. 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.
Detroit-based General Motors Corp and Chrysler LLC were barred by the Bush administration from operating corporate jets as part of their December bailout
Very appropriate argument from the Senator. It seems GM and Chrysler executives are probably feeling some schadenfreude right now. Now we see why the super rich generally favor Republicans.
UPDATE X 2: Even the British press has picked up this story. The Guardian reports:
A New York congressman, John Hall, threatened to introduce legislation forcing Citigroup to reimburse taxpayers for the jet. Hall told the New York Post: "This is an absolute outrage and Congress is not going to let Citigroup get away with this."
John Hall is a Democrat (of course, no Republican would do this) representing NY-19.
UPDATE X 3: Here's some info on the process of buying such planes. It seems speculators also participate in such deals whereas they buy corporate jets but have no intention of taking delivery of them and then sell their "place in line" to another company who may intend to take possession.
It might take a while for Citi to recover its deposit on the canceled jet deal, as the market for corporate aircraft has softened with the economy.
Before the jet market cooled last year, speculators sometimes placed orders with no intention of taking delivery of the plane. They would sell their position in line.
"There was such a backlog — three or three-and-a-half year waits — people could buy positions and flip them for a profit," said Robert F. Agnew, president and chief executive of aviation consulting firm Morton Beyer & Agnew. "Selling a slot today is probably very difficult."
Agnew said buyers typically pay a few percentage points of the purchase price when placing the order, then a series of payments as production begins and other milestones are reached. They might pay about 35 percent of the cost before taking delivery, then pay the balance when taking the plane, he said. At that rate, Citi could have already spent $17.5 million on a plane it will no longer receive.