The Citi National Championship

9th Jan, 2010

Photo: Kevork Djansezian/Getty Images

It is fitting that the ultimate game in the pathetic mess known as the Bowl Championship Series should be sponsored by Citi, the financial giant that engineered the repeal of the Glass-Steagall Banking Act. You might as well put a sign on the midfield logo and the TV box score that says “your tax dollars at work” since Citi was the recipient of federal bailout dollars.

Citi’s sponsorships

Exact figures for what Citi paid for the sponsorship are confidential, since those rights are negotiated with the network which has the rights to televise the game. However, with some digging, you can get a fairly good idea. In 2007, Front Row Marketing did a study of bowl game sponsorships. It put the costs for the BCS championship sponsorship at between $11 and $15 million per year. Sports Business Journal reported Chick-fil-A paid $22 million for a five-year sponsorship of a non-BCS bowl game. Fox charged $1 million for a thirty second commercial for this year’s BCS title game, according to the Hollywood Reporter.

We do know ESPN paid $500 million for the national title game as well as the Sugar, Fiesta and Orange bowls for four years starting in 2011. That is a tidy $125 million per game. Fox had paid $320 million through 2010. Adding all this together, my guesttimate would put the amount Citi paid for this year’s sponsoring rights at close to $20 million.

But that’s not all Citi is sponsoring. We do know that in 2006 they paid the New York Mets $400 million for naming rights to their stadium for 20 years, or $20 million per year. Citi also sponsored the Rose Bowl which given the figures reported above must have cost over $10 million. That puts Citi’s total major athletic sponsorship bill at $50 million per year.

That figure is interesting since Citi received exactly that amount in bailout funds from the federal government. In December Citi agreed to a plan with federal government to gradually repay the bailout money. However, according to the Washington Post the deal has a few strings attached, strings that you and me, the taxpayers are holding.

The Internal Revenue Service on Friday issued an exception to long-standing tax rules for the benefit of Citigroup and a few other companies partially owned by the government. As a result, Citigroup will be allowed to retain billions of dollars worth of tax breaks that otherwise would decline in value when the government sells its stake to private investors.

While the Obama administration has said taxpayers are likely to profit from the sale of the Citigroup shares, accounting experts said the lost tax revenue could easily outstrip those profits.

But maybe we should have expected that from a company that is not shy about using bailout money to pay its executives. In fact one reason Citi is angling to pay back its bailout money is that its executive compensation would no longer be subject to federal oversight. A year ago Fortune reported CEO Vikram Pandit received 2008 compensation valued at $10.8 million. But that’s just beginning. This past summer Citi pulled a neat little trick by shifting bonuses for managers to base pay. The New York Times reported:

For some Citigroup investment bankers and traders, the changes could mean salary increases of as much as 50 percent, depending on their position.

What were they thinking?

Who ever made the decision at Citi to invest in the national championship should win the What Were They Thinking Award. That certainly was the opinion of many in the press. Even the Wall Street Journal choked on the deal. Pete Sepp, vice president for policy and communications at the National Taxpayers Union told them:

Some of the advertising folks at these firms might think it’s important to put their corporate brand on public events, but taxpayers might think they’re being taken for a ride.

Grover Norquist, president of Americans for Tax Reform, was even blunter:

There’s interestingly zero sense of shame.

Citi’s main reason for the sponsorship was to boost their credit card division. They probably need all the help they can get. In 2008 California Attorney General Edmund Brown reached a settlement with Citi over credit card fraud. Said Brown:

Nationally, the company took more than $14 million from its customers, including $1.6 million from California residents, through the use of a computer program that wrongfully swept positive account balances from credit-card customer accounts into Citibank’s general fund…The company knowingly stole from its customers, mostly poor people and the recently deceased, when it designed and implemented the sweeps.

Google “Citi credit card complaints” and it will give you an afternoon of reading.

Second place in the What Were They Thinking Award should go to the NCAA. Now the nation’s colleges and universities are associated with a company that started out in the loansharking business, almost single-handedly was responsible for the repeal of the Glass-Steagall Act and became indelibly linked to the nations financial crisis. But then they might have called this the Bailout Bowl since another of the sponsors included Chrysler.

As the red and white of Texas and Alabama bounced back and forth on the grass in Pasadena while much of the rest of the nation shivered with record cold, ESPN kept flashing on the screen “Citi BCS National Championship Game.” Leave out the “c” and you have a pretty good idea of what a lot of football fans think about this game, especially those in Boise, Idaho. You will also have a pretty good idea of what a lot of folks think about Citi.

Parallels between Citi and the BCS

What is remarkable about this unbelievable and unsettling pairing of Citi and the BCS is that in both cases the BS stems from remarkably similar causes. Start with the numbers. Trying to understand the computations the BCS used to determine who would play in this farcical championship is not unlike trying to understand one of Citi’s mortgage agreements or the complicated deals if put together. The same opinion has been voiced about both, neither makes any sense.

The parallels get more sinister. It is an open secret that the BCS is rigged to favor the so-called power schools and power conferences. That two of the best football programs money can buy (more on that in a second) — Alabama and Texas — should end up in the national championship elicits a “what’s new” from those of us whose college and university football teams stand about as much chance of landing in the national championship as a palm tree would outside my window where the temperature reads five below.

Rigging the BCS

Start with the way the BCS is set up. The BCS is actually an alliance of the so-called “power conferences” and the major bowls. It is managed by the commissioners of the 11 NCAA Football Bowl Subdivision conferences and the director of athletics at the University of Notre Dame. The conferences are Atlantic Coast, Big East, Big Ten, Big 12, Conference USA, Mid-American, Mountain West, Sun Belt, Pacific 10, Southeastern and Western Athletic. The selection procedures guarantee the champions of the Atlantic Coast, Big East, Big Ten, Big 12, Pac-10, and Southeastern conferences will have automatic berths in one of the participating bowls through the 2013 regular season. The other conferences get into the BCS only if a team is in the top 12 of the final BCS Standings or if it is in the top 16 and outranks any of the major conference champions.

The likelihood of that happening was exposed by a team of University of North Florida business professors who finally analyzed BCS voting and came up with conclusions that should surprise no one. The group summarized its findings:

The professors found evidence of excessive favor toward teams in the SEC, Big 12, and PAC-10 (and against teams in the Big East, and to a lesser extent the Big 10), as well as toward teams that played on television, particularly on prominent networks. Additionally, they found that voter ballots were too heavily related to simplistic performance indicators such as the number of losses and losing in the preceding week. The business professors did not find evidence of a so-called East-coast bias by AP voters.

They concluded:

Our results have significant managerial ramifications for the selection and distribution of voters by the AP, and whether the champions so designated would have been the same without such bias.

The best college rankings money can buy

Last fall I wrote about how the baseball playoffs had become dominated by teams with the highest team salaries. The article asked whether it was possible to buy a World Series and concluded that recent records indicate the answer is yes. The BCS now raises a similar question about college football.

If you examine a study by CNN/Money which ranks college football program revenues you will see a fair number of your BCS teams. Texas ranked number one followed by Ohio State. Alabama was fifth. Forbes annually ranks the twenty most valuable teams. This past year Texas also ranked first in that survey followed by Notre Dame, Penn State, Nebraska, and Alabama again fifth.

The coaches of the two teams in the BCS were certainly the best money could buy. According to ESPN commentary either one of them stood to make a bonus of approximately $400,000 if they won the game. Alabama coach Nick Saban makes almost $4 million a year and Texas coach Mack Brown makes $5 million.

This takes us back to the rigging of the BCS. You begin to understand why the BCS is rigged when you follow the money.

Each of the six big-money conferences are guaranteed a total of $18 million in BCS money, or between $1.5 million to $1.8 million per school, depending upon the number of teams in each conference. In addition, any BCS conference that sends more than one school to a major bowl is eligible for an extra $4.5 million.

How Citi rigged the game

Interestingly Citi also rigged the game. The story of how Citi maneuvered to repeal the Glass-Steagall Banking Act has been told many times on this blog, so I will not go into it here other than to recall how a middle of the night phone call from Citi head Sandy Weill to Bill Clinton broke a deadlock in the movement to repeal the banking law that was one of the crown jewels of the New Deal. As I have also written, that repeal played a big role in creating the current financial crisis.

Since the repeal of Glass-Steagall Citi’s performance has resembled that of Texas’ freshman quarterback shortly before halftime when he flipped the ball into the bread basket of a rushing Alabama lineman. At one point rumors were flying that America’s largest financial institution might go the way of Bear-Stearns.

Apparently this recent performance has not set well with former Citi head Sandy Weill recently sounded in the New York Times like he was not too happy with the quarterbacking at Citi. Weill still maintains his Wall of Me complete with a signed picture from Bill Clinton. Also prominently displayed is a hunk of wood — at least 4 feet wide — etched with his portrait and the words “The Shatterer of Glass-Steagall.” The Times reported Weill tried to return to Citi in 2007.

I think I was a pretty good student of the markets, and the business. I had a good feel of things. I felt that just because I retired didn’t mean my brain went to mush. Maybe I could help.

Given the wreck he made of Citi and the American economy there are a lot of places Sandy Weill ought to be, but the head of Citi is not one of them. Weill made sure the Times mentioned his charitable contributions, but there are a lot of people who were victimized by Citi dating back to its earliest days that would rather Weill’s conscience would acknowledge his past sins and make good with them.

Endgame

The BCS game became more exciting the second half with Texas closing the gap late in the game only to fumble the ball yards from their own goal line on what Texas fans everywhere hoped would be the drive that would win them the coveted number one ranking.

For sports analysts reading this that fumble was the fault of the highest paid coaching staff in the country, which allowed an Alabama player to lineup in blitz formation without calling a timeout to alter their blocking scheme. No Texas player apparently called the blitz either which allowed linebacker Eryk Anders to run full tilt into Texas QB Garrett Gilbert with a jarring blindside hit so hard that no human could have held onto the ball.

Meanwhile a lot of us are wondering about blindside hits and coaching mistakes. The American economy is still up in the air and some fear that the equivalent of that Texas fumble may be lurking in the future. Meanwhile the Obama Administration still refuses to enforce the nation’s banking laws, allowing three corporations that received bailout money to control more than 10% of the market: Bank of America, Wells Fargo and J.P. Morgan. Although it once was the nation’s largest financial institution, Citi is not on the list due to the mess it made after the repeal of Glass-Steagall.

For the game and the economic mess we are in we need to thank the sponsor—Citi. At least Sandy Weill wasn’t there to present the trophy.