Defending Citigroup

by
February 5, 2009

It’s interesting to see politicians and media people excoriating Citigroup for the Mets’ naming rights deal while folks who, you know, actually know stuff about business and sports are defending it. This from Darren Rovell:

It is not rational to think the contract can just be dissolved, so if we want to talk breakup fee, let’s get started. Given the fact that the Mets likely can’t get $150 million for the same deal today, you’d have to think that Citi would have to pay at least $150 million to terminate the deal. Is that what people want? That instead of getting something for $400 million, they get nothing for $150 million? That’s a bigger waste than the deal that exists now.

He has four other good points as well, and I agree with all of them.

(thanks to Pete Toms for the heads up)


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pete
15 years ago

Cases like this and the executive compensation dilemma are the best arguments against such intense government intervention in the private sector. There really is no good answer when so much public money is directly at stake.

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jason11
15 years ago

This analysis stinks.

It all comes down to whether you think $400 million for naming rights is a good deal for a company.  If you think its a good advertising deal, you will approach this one way.  If you think its a collassal waste and more of a $400 million perk instead of advertising, you will approach it another.

If there really is the notion that there is $400 million worth of advertising value that Citi is getting, few would object.  Most people view it as maybe $1 million worth of advertising and $399 million worth of Citi throwing money away to glorify itself and probably acquire some sweet box seats for executives.

If you think its good advertising, its obviously better to pay $400 million and get something instead of spending $150 for nothing.

If you think its terrible advertising but a sweet perk for the city braintrust….then its better to burn the $150 and get the other $250 back.

Personally…given how bad the judgement of Citigroup has been over the last 16+ months, I’d think that the opinion of any random guy off the street is more valuable than the decisions made by the Citi braintrust.

We may have lost hundreds of billions and didn’t understand what we were doing…but trust us, this $400 million investment in stadium advertising is a brilliant move!!

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Nick
15 years ago

The term “sunk cost” comes to mind.

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Jason Rosenberg
15 years ago

I was going to bring up “sunk cost” as well. Let’s assume that the $150 mil is a good number for the breakup fee. That’s now sunk, right? So the real question is “is the advertising worth $250 mil?” If not, then getting nothing for $150 mil is indeed better than getting too little for $400 mil.

Of course, my guess is that the answer is still “no way in hell is it worth it,” but what do I know?

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pete
15 years ago

“We may have lost hundreds of billions and didn’t understand what we were doing…but trust us, this $400 million investment in stadium advertising is a brilliant move!!”

Until I read the part after the ellipses, I thought you were going to rip on the federal government and its attempts to push through a second porkulus bill after the abysmal failure of the first one.

I don’t trust Congress to do much of anything correctly, especially when there’s such an opportunity to grandstand, so I’d rather them not get involved at all and roll the dice with Vikram Pandit.

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Melody
15 years ago

“Taxpayers’ Field” anyone?
Too bad “Citizens’ Bank Ballpark” already exists, because it’s a perfect description.

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kendynamo
15 years ago

yes thats right.  good for rovell.  politicians are the worst.  even worse then wall street.

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Ethan Stock
15 years ago

This is really easy.  The government should let Citibank go out of business, as they desperately need to do, instead of propping them up with 300+ billion in support like they have done to date.  You could start a brand-new, much nicer bank than Citibank for $300B+.  Then the Mets can get in line at bankruptcy court just like everyone else (I imagine something similar happened with Enron), and come to grips with the fact that no one is paying anything like $400M for naming rights these days and, uh, by the way, consequent to that and a lot of other cold harsh reality, the Mets are worth a lot less than they were 12 months ago.  Welcome to the new world.

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