Rendering of Citi Field
Due to the economic crisis affecting financial companies, the big corporations that have taken money from the federal Troubled Asset Relief Program (TARP) have come under scrutiny for their use of capital and list of expenditures. The latest salvo was by several politicians, U.S. Reps. Dennis Kucinich (D-Ohio) and Ted Poe (R-Texas), who are questioning Citigroup’s $400 million stadium naming rights and marketing deal with the New York Mets. The deal includes calling the stadium Citi Field for twenty years. Citigroup, like many other financially strapped companies, has taken out about $45 billion from TARP.
At first glance, the concerns of Kucinich and Poe make sense. A company that is taking valuable taxpayers’ money because of its financial situation should not be spending $400M simply to put their name on a baseball stadium. However, is this politics as usual? There are several issues here that show that public perception is not always reality.
New York Mets
The obvious issue here is that the marketing deal is a legal binding agreement between two corporations. How can politicians force a company to renege on a legal business deal? Does giving $45B equate to complete scrutiny of the said company? Doesn’t the company still have some independence in fulfilling previous agreements and decisions? What about the Mets? They have made other business decisions since then based on having that revenue stream. Is it fair that politics might force a legal deal to be reneged?
The second issue here is marketing. As financially strapped as companies are, they still need to spend a portion of their budget on marketing. This is the case even if they are receiving money from the federal government. What do the politicians expect them to do? Use 100% of their budget on selling loans and improving the credit crisis? That’s unreasonable because marketing helps increase the financial business. Maybe Citigroup continues to decide that Citi Field will in fact have a positive effect on its financial business.
Citigroup
A third issue is the actual effect of the $400M. The number seems large but it is over the course of twenty years. That amounts to $20M a year. Now we know (at least with very high probability) that the economy won’t be in the doldrums for the next twenty years. That means the deal, as affected by the economic crisis, is in the range of $20-$60 million. This is chump change for a large corporation like Citigroup. More specifically, it is 0.04% to 0.13% of the $45B in assistance! When you look at the fact that Citigroup has revenues of over $19 billion and has a cash/debt ratio of $763B/691B then you start wondering is this worth the time to criticize over?
This reminds me of the grilling that the auto industry received last fall when they tried to get some assistance from Congress. The amount was tiny compared to the bailout received by the financial industry. Yet, politicians were focusing on politics as usual. They focused on these tiny expenditures that have bad public perception (such as private airplanes by executives) instead of worrying about reality and where the real money is going. The auto industry did not cause this mess. The auto industry also employs millions of hard working Americans. The financial industry and politicians caused this mess, and instead of them getting grilled, the politicians gave the financial industry a massive bailout without any public hearings. Talk about fairness. Now we have more politicans worrying about a stadium marketing deal that although has a bad public perception, when analyzed in further detail really has no financial bearing on the situation. It’s absurd and once again, politics at its best.
Silent Archimedes 