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Getting more bang for bailout billions

Man, I’m getting tired of this.

Once again we’re bailing out another too-big-to-fail company -- now it’s Citigroup -- and again we’re acting like we’ve got these guys by their you-know-whats because we’re imposing some limits on how much cash top execs get to pocket during the whole ugly ordeal.

On top of that, the Treasury Department and Federal Reserve said Tuesday that they would be pumping $200 billion into the consumer credit market by guaranteeing securities backed by credit card debt and other loans, apparently with no strings attached. The idea is that this will encourage banks to make more money available to consumers.

Enough already. All along, I’ve reluctantly accepted the need to prop up many of these hopelessly mismanaged companies because of the importance of protecting the overall economy. You have to put out the fire at the local crack house if that’ll keep the rest of the neighborhood from being immolated.

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But we’re letting these jokers get off too easy. These bailouts are an opportunity for some long-overdue housecleaning, and we can do a whole lot better than just making CEOs pay for their own darn country club memberships.

“If they’re coming to us for money, we’d be crazy not to get something out of it,” said Dean Baker, co-director of the Center for Economic and Policy Research, a liberal-leaning Washington think tank. “We should be saying, ‘You take our money, this is how it’s going to be.’ ”

Most of the talk around the heavy-duty bailouts so far -- mortgage giants Fannie Mae and Freddie Mac, and insurance behemoth American International Group -- has focused on how much of an ownership stake Uncle Sam would take, and what kind of return taxpayers could expect.

The Citigroup bailout unveiled this week is no different. It involves a $20-billion infusion of taxpayer money, following an earlier $25-billion allotment, plus guaranteeing about $306 billion in loans.

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In return, Citi has agreed to halt dividend payments for three years and to take a closer look at how much it pays the fine folk in its executive suite.

Many people will say Citi deserves to go under for making such a hash of things. That’s true. Unfortunately, if a company of Citi’s size and scope went down the drain, it would likely take much of the financial-services industry with it.

“If we allowed Citibank to go under, there would be massive consequences,” said Lawrence Harris, an economics professor at USC and former chief economist for the Securities and Exchange Commission. “It would bring us into another Great Depression.”

Yet this is the same Citibank that recently jacked up the credit card interest rates of millions of customers because of the “difficult market environment” -- even though the company vowed last year to abandon the practice of raising rates at any time for any reason.

This reminds me of some remarkable correspondence that Los Angeles resident Marilynn Engber recently sent my way from her card issuer, Discover Financial Services, which had inexplicably switched her from a fixed rate to a variable rate.

She said she repeatedly contacted Discover to demand a fuller explanation. Each time, the company replied only that “this change was made to address possible fluctuations in economic conditions.” Whatever that means.

Discover Chief Financial Officer Roy Guthrie said last month that the company was giving “full consideration” to getting in line for its own serving of bailout stew. Or maybe Discover will be satisfied with that $200 billion pledged Tuesday for consumer credit loans.

It’s time we started getting more bang for our billions.

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In the case of banks and other financial-service providers, that means at the very least no more service contracts written in impenetrable legalese. No more changing of terms without cause (such as if a cardholder misses payments). No more allowing cardholders to make only minimum payments without informing them of the potentially dire consequences of never-ending debt.

It means that if banks can’t embrace simple concepts like transparency and simplicity on their own, we require them to adopt more consumer-friendly practices as a condition for survival.

The same goes for U.S. automakers, which are welcome to their share of bailout cash. But in return, they can bid sayonara to the big-fat-SUV business and enter a brave new world of turning out the most fuel-efficient vehicles on the planet.

“There haven’t been enough quid pro quos,” said Jared Bernstein, senior economist at the Economic Policy Institute, a Washington think tank. “We should be pressing our leverage in the form of re-regulating these companies.”

It’s our money, after all. We have every right to spend it as we see fit.

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David Lazarus’ column runs Wednesdays and Sundays.

Send your tips or feedback to david.lazarus@latimes.com.

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latimes.com/lazarus/bailout

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