Citigroup, the banking giant which is being propped up with funds from the US taxpayer, has scrapped plans to take delivery of a $50m corporate jet, after a public outcry and a reprimand from President Barack Obama.
Less than 24 hours after saying it was too late to cancel the order, Citi bowed to pressure from the White House and from Timothy Geithner, the new Treasury secretary, who promised yesterday to ensure that government funds injected into the banks are being used properly.
To many on Wall Street, the incident highlighted the unprecedented level of government intervention in the day-to-day running of the country's major banks. It also underlined again the lack of tolerance of perceived corporate excess, now that some of the industry's biggest institutions are reliant on taxpayer handouts to stay afloat. Citi has twice had to take cheques from the US government, totalling $45bn in new capital, and it has also been promised that US taxpayers will absorb losses on up to $306bn of its toxic mortgages and other investments.
The bank has pledged to reduce its fleet of executive jets from five to two. Indeed, when it was reported last year that Citi was hawking two of its existing Dassaults – replete with plush, carpeted interiors with space for 12 passengers, split into three cabins – through a small Maryland broker, the company boasted that executives were now being encouraged to fly commercial.
But the company had paid a deposit on a new Dassault Falcon 7X, whose marketing literature boasts of "uncompromising cabin comfort" and "un-precedented value", to replace older jets in 2005. It said on Monday that it would cost up to $4m to cancel the order and that it would therefore take delivery.
The White House contacted Citigroup on Monday to reiterate President Obama's position that such jets are not "the best use of money at this point", calling them "outrageous" spending for a company getting taxpayer dollars. A Treasury official followed up yesterday with additional pressure, at the urging of Mr Geithner.
Citi reversed course. In a statement, it said: "We have no intent to take delivery of any new aircraft." The deposit may be recoverable if and when the plane is sold, industry analysts said.