Feb. 23 – India’s Home Affairs Minister P. Chidambaram said the State Bank of India (SBI) should have bought Citibank when it was selling at US$1 a share.
In a telling rebuke to Indian business leaders, Chidambaram said that he had at one point told the SBI Chairman, O. P. Bhatt, “Why don’t you buy Citibank?” He said he made this suggestion on three occasions to the head of the country’s largest commercial bank. “Citibank’s shares were going at $1 a share. That is the time we should have bought,” Chidambaram was quoted as saying by The Hindu Business Line during the 54th Foundation Day of the All-India Management Association.
He reiterated that India was missing a number of big opportunities as it was not letting the banking industry consolidate and grow. “We are tying down the Indian banking industry hand and foot. We are not letting them consolidate or grow and as a result, we are missing huge opportunities. We are missing opportunities because of our timidity, because of fear of unknown, self-made limitation and bureaucratic tiresome procedures,” he said.
And that is why politicians shouldn’t attempt to be businessmen. While buying a company if it’s share price is low sounds good you need to know what the liabilities on the books of that company have. All the big banks in the USA owe their survival to the US stimulus funds and some behind-the-scenes pressure for AIG to pay Goldman Sachs 100% on the dollar on Credit Default Insurance. Even today no one knows really what all the off-the-balance sheet items are on the books of Citibank. The Chinese after been blocked previously on several attempts to buy US companies were hypocritically offered a free hand to buy into US financial institutions before the banking bail-out. They didn’t bite.
Well I’m not sure if thats entirely fair. Chidambaram is an economist and ran the Ministry of Finance fairly competently. His comments were more a “get out a snap up some distressed overseas assets” kick to India plc than anything else.