If companies like Citigroup and AIG are so bad off that they need to run to Uncle Sam for money, why are they continuing to spend billions on sports’ sponsorships:
AIG, Citibank and a number of other federally bailed-out financial institutions have no plans to cancel hundreds of millions of dollars in sports team sponsorships, even as they take billions in taxpayer support, ABC News has found.
In boom times, the sponsorships were seen as a way to advertise the firms’ “brands” and appeal to potential customers. Even today, at least one bank told ABC News that a naming deal was increasing its revenue. But critics, including a member of Congress, say the decision to continue them now is hard to defend.
Struggling Citibank just sealed a multi-billion-dollar emergency “backstop” deal with the U.S. government. The financial behemoth, suffering with billions in bad mortgage-related assets on its books, recently shed 53,000 workers and saw its stock price lose over half its value. Yet it’s in a 20-year contract to pay the New York Mets $400 million to name the team’s new stadium “Citi Field.”
“This type of spending is indefensible and unacceptable to Citigroup’s new partner and largest investor: the American taxpayer,” said Rep. Elijah Cummings, D-Md., in a statement Monday.
Citi isn’t alone: Imploding insurance giant AIG is paying the British soccer team Manchester United $125 million for the privilege of having its logo appear on Man U’s uniforms. That, despite the fact the firm is standing largely thanks to a $150 billion lifeline from the U.S. Treasury.
“A friend of mine joked they should put ‘US Treasury’ on the front of their uniforms,” said Steve Ellis of Taxpayers for Common Sense, a Washington, D.C.-based nonpartisan watchdog group which is outraged by the expenditures.
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A spokesman for AIG confirmed that its sponsorship deal with Manchester United remains in place, but that the company is “reviewing all sponsorships to identify any relationship that might be essential, to maintain the value of the business and service customers, so we can repay the [government] loan.”
Citicorp is not reviewing its deal with the Mets, chief financial officer Gary Crittenden said in an interview Monday. Crittenden told CNBC the contract was “legal and binding” and “not an issue.”
But, you see, when you become a debtor to the United States Government, when you allow the Treasury Department to acquired shares of your stock, well, then you open yourself up to the wonderful world of politics and you’re forced to listen to one largely irrelevant interest group after another tell you what they think you should do with the money you’ve been given:
Instead of spending millions on naming rights, marketing guru Godin says, why not invest in something that will really improve the credibility and public opinion of banks: customer service. “Instead of spending $400 million to put your name on the side of a stadium, how about hiring enough people so that every time someone calls you on the phone it would be answered by someone who knew your name and was delighted to hear from you?”
This is exactly why I was opposed to the bailout from the beginning, and specifically to that portion of the bailout that allows the Federal Government to become a part-owner of otherwise private companies. Once that happens, it’s absolutely inevitable that the politics that is a daily part of life in Washington will insinuate itself in the operations of the corporation(s) in question.
How long will it be before we start hearing people talk about politically “appropriate” investment strategies that these banks should be following ? Or before they are pressured to increase hiring for politically favored minorities ? Or give mortgages to people who otherwise couldn’t afford them ?
Oh yea, we already did that last one, didn’t we ?
This is only going to get worse.
