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Warren Goes After Treasury Official Over ‘Too Big To Fail’

It was a tough day to be Herbert Allison. The Treasury official charged with monitoring the $700 billion Wall Street bailout appeared Thursday before the congressional panel created for that same purpose — and was promptly lashed by committee members for evading many of the questions they hurled his way.

The topic at hand was Citigroup, which received $45 billion in cash and $310 billion in guarantees through TARP between October 2008 and January 2009.

More recently (last month, in fact), Standard and Poor’s granted Citigroup an “A” credit rating — three clicks higher than it otherwise would have given “to reflect the likelihood that if further extraordinary government support were needed, it would be forthcoming.” Oversight Chairman Elizabeth Warren today offered a translation: “In other words, Citi is too big to fail and this fact is now directly, measurably affecting its credit rating.”

Yet when Warren asked Allison what the taxpayers — who still own more than a quarter of the company — had received in return for that kind credit rating (which allows Citi to do business more cheaply), Allison didn’t directly respond. The exchange is telling:

Warren: The market clearly perceives that there is a too-big-to-fail guarantee, and the market is rating Citi higher because of that. That gives Citi an advantage in raising capital. That is very valuable to Citi, and it is potentially very costly to the American taxpayer. And I want to know if the American taxpayer gets paid for that.

Allison: There is no too-big-to-fail on the part of the U.S. government. And I can’t account for any statement that some outside agency may make.

Warren: I will take that as a no.

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