New Jack Citi
Barely a month ago, President Obama signed into law sweeping reforms that restrict credit card interest rates and fees. We guess nobody at the U.S. bank of
got the memo.
Citigroup, which is one-third owned by the U.S. government, sharply increased the interest rates on as many as 15 million co-branded credit cards, the
reported Wednesday, even as the Obama administration wages war on abusive lending practices. Holders of co-branded cards who failed to pay their balance in full at the end of the month saw their rates surge by an average 24% -- or nearly three percentage points -- between January and April, the
said, citing a
Protecting consumers from pushy credit card companies has been a priority for Obama ever since his presidential campaign last year. Making Citi's rate increases all the more awkward is the fact that Obama's administration recently sent draft legislation to Congress to create a new agency to oversee consumer protection in the financial industry.
Can the good folks at Citi embarrass the president? Yes they can!
Citi, in a statement to the
, said it "adjusted pricing and card terms for some customers as part of our regular account reviews."
Oh, please, there is nothing regular about Citigroup or any of its practices. Citi's credit card portfolio has experienced massive delinquencies and charge-offs, and it's only going to get worse as unemployment rises and the economy stays sour.
Granted, other banks like
Bank of America
are feeling the squeeze as more consumers have trouble paying their bills. But whether it's cranking up interest on credit cards or trying to raise base salaries to make up for lost bonuses, Citi is always in a class by itself, unable to get out of its own way.
And now after this latest mishap, quite hilariously, it is directly in the president's way.
Dumb-o-meter score: 95 -- Citigroup better beg for a presidential pardon.
The Iranian government is listening to the conversations of millions of Iranians thanks to
Nokia Siemens Networks
technology. Take it from us, it's anything but a party line.
Nokia Seimens Networks, the joint venture between German conglomerate
, and Finnish cellphone maker
, defended its decision to sell eavesdropping technology to Iran, saying Tuesday it had done nothing wrong. The Finnish-German venture admitted it sold equipment that is able to monitor calls to TCI, Iran's national telecommunications company, in late 2008.
Nokia Siemens spokeswoman Riitta Mard said the company was astonished over the uproar following accusations that the hardline Iranian government is using its technology to monitor mobile phone calls, and possibly emails, during the massive postelection protests still rocking the country.
Mard said the system sold to TCI "doesn't allow monitoring international calls, and it absolutely doesn't allow monitoring Internet and data communication, not even SMS or picture messages."
That's lovely, Riita, but eavesdropping on international calls is not the problem for the protesters who are airing their grievances on Tehran street corners.
Mard went on to justify the sale by explaining that in most countries, including all European Union members and the United States, mobile networks are required by law to provide capability for monitoring local calls. Human rights groups, however, have condemned the selling of such equipment to repressive regimes like Iran's because it can be used to crack down on dissent.
Ben Roome, a spokesman for the joint venture, told
The Wall Street Journal
last week that the company does have a choice about whether to do business in any country, but "we believe providing people, wherever they are, with the ability to communicate is preferable to leaving them without the choice to be heard."
Those protesters are being heard alright. Unfortunately, it's by the people trying to do them the most harm.
Dumb-o-meter score: 90 -- Nokia Siemens should have just hung up, but chose not to.
Made in the U.S.A.?
After this latest legal episode, maybe they should rename the company
Almost American Apparel
American Apparel said Wednesday that the government found that 1,800 of its employees, or about one-third of its Los Angeles manufacturing operation, are either illegally working in the U.S. or potentially unauthorized to work. The controversial clothing company, which prides itself on its "Made in USA" labels, said in a statement it was not found to have willingly hired illegal workers.
If the unauthorized employees are unable to convince the U.S. Immigration and Customs Enforcement of their eligibility to work, they will be forced to leave the company, American Apparel said in a statement. Whether they will be forced to leave the country, well, that's another matter.
"The company remains very proud of its track record as an advocate for the comprehensive reform of the country's immigration laws," said company founder and CEO Dov Charney in a statement. Charney added that American Apparel is well known for its "sweatshop-free" operation and claimed that the company pays some of the highest wages in the industry.
Reforming America's immigration laws is one thing; abiding by the current laws on the books, well, that's another matter. And considering how much time Charney spends hanging around courtrooms and law firms, one would think by now he would know better.
Just over a month ago, Charney agreed to pay Woody Allen $5 million to settle a lawsuit over the company's use of his image on advertisements depicting the film maker as a Hasidic Jew. Prior to that ridiculous legal tussle, Charney kept his lawyers busy fending off sexual harassment and wrongful termination lawsuits.
American Apparel says the immigration quandary won't hurt its financial results and that it has a surplus of inventory and production capacity. Nevertheless, the company's stock fell over 10% on the news, so Charney's argument obviously wasn't strong enough to stop shareholders from selling.
And on Wall Street, stockholders are the only jury that matters.
Dumb-o-meter score: 85 -- Check out Charney's new line of robes: The Supreme Court Collection.
employees may want to assume the crash position next time their CEO's mouth takes off.
Willie Walsh, the chief executive of British Airways, defended his call for employees to work for free for a month Monday, even after unions slammed the carrier for bullying workers into a voluntary pay cut program. BA revealed last week that almost 7,000 staff, among its 40,000-strong workforce, agreed to lower wages in response to Walsh's plea for help in cutting costs to offset the travel slump.
Walsh presumed he was setting a good example when he declared in late May that he would forgo his salary of 61,250 pounds (then $97,000) for the month of July. At the time, the carrier told its employees that following their leader's brave maneuver would save the struggling airline up to 10 million pounds.
That's fine by us. We may be tough on CEOs, but we're not above giving one a hearty pat on the back if he takes one for the team.
Unfortunately, the UNITE airline union said BA was doing more arm-twisting than back-patting. The union said workers were flooded with intimidating emails from senior management, putting pressure on them to volunteer to have their wages slashed.
Walsh made things worse with the union when he acknowledged that his own pledge to forgo a month's salary would cause him "little pain."
"What I was expecting people to do was stand back and ask themselves what they can do to help in a time of need, what they can do to make a difference," Walsh told a conference at the London Business School.
Unfortunately, the difference that really matters in saving all their jobs is the record loss of 375 million pounds ($595 million) British Airways reported for the year ending March 31. And that's a difference that can't be made up in a single month by a CEO's grand-standing or an airline squeezing already squeezed employees.
Dumb-o-meter score: 80 -- CEO feels "little pain." Employees see little brain.
Same Old AIG
No matter how the company tries to prop itself up,
shares just want to go down.
The humbled insurer's stock sank Wednesday even after shareholders approved a 1-for-20 reverse-stock split intended to raise the company's share price as it continues to shed assets and spin off subsidiaries in order to repay the government and return to profitability. Taking the split into account, shares of AIG fell $4.98, or 21%, to $18.22 in Wednesday afternoon trading.
Prior to the split, AIG's shares had closed Tuesday at $1.16 per share, down almost 13%, after the company disclosed in a regulatory filing that it could face additional losses on credit-default swaps remaining on its books. AIG shares traded over $100 earlier in the decade and were near $70 when the financial crisis began in late 2007.
Poor AIG. Every day is worse than the one before.
At AIG's annual meeting on Tuesday, shareholders overwhelmingly approved the proposal to lift the share price by shrinking the number of outstanding shares. CEO Edward Liddy said in May that a split would protect the company's listing on the
New York Stock Exchange
The real brunt of the selloff was felt by the U.S. government, which now has an 80% stake in AIG. Uncle Sam stepped in to rescue AIG last September at the height of the financial crisis and has invested a total of $182.5 billion in the zombie insurer to date. AIG blew itself up when it veered away from its traditional insurance business and toward underwriting risky financial derivative contracts.
Responding to a shareholder's question, Liddy candidly replied that the government will likely hold onto its stake for a long time to come.
"I can give you no assurances that it will ever change," Liddy said.
That's good news for us. What would the Five Dumbest Lab do without them?
Dumb-o-meter score: 75 -- Stock-splitting for them. Side-splitting for us.
Before joining TheStreet.com, Gregg Greenberg was a writer and segment producer for CNBC's Closing Bell. He previously worked at FleetBoston and Lehman Brothers in their Private Client Services divisions, covering high net-worth individuals and midsize hedge funds. Greenberg attended New York University's School of Business and Economic Reporting. He also has an M.B.A. from Cornell University's Johnson School of Business, and a B.A. in history from Amherst College.