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Progressive Review - Obama's proposed public works program is a good one except for one important thing: the lack of any mention of railroad construction. Railroads get about 2.5 time more ton miles than trucks per gallon of fuel. At some point, we have to join the rest of the world that has long understood the value of rail transportation.

Phil Mattera, Dirt Diggers Digest Treasury Secretary Henry Paulson has once again shown his willingness to take speedy action to rescue his friends in the financial world while allowing industrials such as the Big Three automakers to twist in the wind. . . Less than two weeks after announcing he had given up on the idea of purchasing toxic assets from banks in favor of capital infusions, Paulson is now saying that Treasury and the FDIC will "provide protection against the possibility of unusually large losses on an asset pool of approximately $306 billion" of mortgage-backed loans and securities. Given the way those securities have been falling in value, that possibility is far from remote. Citi graciously agreed to absorb the first $29 billion in losses, but taxpayers will probably be on the hook for much more. . .

[It is] amazing to see the federal government give essentially a blank check to Citi while the automakers are in limbo. The Big Three have a lot of mistakes to answer for, but they don't compare to Citi's checkered history. Throughout its history, the company has made reckless decisions that weakened the financial system and necessitated its own rescue. As early as the financial panic of 1837, what was then called City Bank had to be bailed out by tycoon John Jacob Astor. In the early 20th Century, the firm, then the main bank of the Rockefellers and Standard Oil, was one of the first commercial banks to make a big move into securities. This paved the way for the excesses of the 1920s and the ensuing stock market crash.

During the 1970s, First National City Bank was a major instigator of lending to third-world countries, which later backfired on the big banks. That and other forms of forms of questionable lending weakened Citi's financial condition, prompting it to solicit a big capital infusion from Saudi prince Al-Waleed bin Talal in 1991. Pursuing a replay of the 1920s, Citi merged in 1998 with insurance and securities giant Travelers Corp. and began acting more like an investment bank than a commercial one.

Over the past decade, Citi led the way in another boomerang situation: promoting subprime lending to low-income borrowers. In 2000 Citi spent $31 billion to purchase Associates First Capital, one of the more aggressive predatory lenders responsible for the wave of untenable mortgages that are now poisoning the financial system.

All this doesn't include other scandals involving money laundering and collusion with the likes of Enron and WorldCom. In the latter two cases alone, Citi had to pay some $5 billion to settle investor lawsuits. Citi's finances weakened to the point late last year that it had to get another Middle Eastern shot in the arm-a $7.5 billion investment by the government of Abu Dhabi.

TPM Cafe - The taxpayers are coughing up tens of billions of dollars because Citibank was run by incompetent people. As the Washington Post reminds us today, one of those people, Robert Rubin, was formerly a close associate of the two top government officials in charge of the bailout. He knew Treasury secretary Henry Paulson from his days at Goldman Sachs before he joined the Clinton administration. Rubin worked with New York Federal Reserve Board president Timothy Geithner when he was Treasury Secretary.

While it's nice to see old friends working together, this one really raises some concerns. There are tens of billions of taxpayer dollars being tossed around with minimal accountability. It is difficult to see why we should let Citigroup continue to be run by the crew that made it a ward of the state, especially when one member of this crew is such good friends with the people controlling the money.

Robert Rubin and the rest of the top management should be sent packing, just as was done with AIG. Anything less looks like a case of hyper-crony capitalism that would embarrass the "crony capitalists" that Rubin and his followers used to rail against back in his days at Treasury.

ProPublica : And at a hearing last week, Rep. Spencer Bachus (R-AL) asked Fed Chairman Ben Bernanke: "When do you anticipate letting the public know" what collateral you're taking? His answer: Not any time soon. Bernanke argued that disclosure would be counterproductive. He said that naming the banks and collateral involved would create a "stigma" that would discourage further lending.

So the Fed has kept the details of its activities quiet and at the discretion of its five governors, as well as top officials of the 12 regional Fed banks, according to the Post.

The Fed's lending last week was 1,900 times the weekly average for the three years before the current credit crisis, according to a Bloomberg News report. In total, the government is prepared to lend more than $7.4 trillion, or half the value of everything produced in the nation last year, Bloomberg reported
Some of the Fed's deals could be increasingly risky, the Washington Post explained:

The Fed has increased the size of its balance sheet and replaced the ultra-safe U.S. government bonds it normally keeps on its books with loans to banks and others.

A year ago, the central bank had assets of $868 billion, of which about 90 percent was in Treasuries. Last week, it had assets of $2.2 trillion on its books, of which 22 percent was in Treasuries. Much of the remainder represents the new lending to banks and other financial institutions.

Bloomberg - Caterpillar, based in Peoria, Illinois, has said the U.S. needs as much as $700 billion in new roads, bridges, airports and ports to remain competitive with countries such as China. Public projects account for about 30 percent of total construction spending in the U.S. . .

The plan's components are likely to remain essentially the same as the $175 billion package Obama initially advocated, said a person familiar with the presidential-transition team. Spending focused on "shovel-ready" infrastructure would be ratcheted up because the Obama team believes it has great job-creating potential, the person said.