Citigroup and the Bottom-up Movement

By Jane Genova - February 4, 2012 | Tickers: C, VZ | 0 Comments

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Citibank, owned by Citigroup (NYSE: C), should know better about playing cute with customers.  It has the experience of Bank of America (NYSE: BAC), Verizon (NYSE: VZ), and Netflix (NASDAQ: NFLX) to have learned from.  Sooner than later, Citibank could be the target of what Motley Fool analyst John Reeves discusses as the “bottom-up movement.”  In essence, that’s when ordinary people push back, succeed, and get more confident.  Ultimately, they can and do bring institutions down.  Low cost, high reach, self replicating social media has become the preferred revolutionary weapon. Stream video of the overthrow and a good time is had by all, around the world.

Recently, we got a peek at the early stage of that process in the U.S. Bank of America tried to arbitrarily impose a $5 monthly fee for debit card users, Verizon a $2 monthly one for wireless customers, and Netflix a very peculiar billing system. The bottom became agitated – and won against the top.  Verizon’s retreat was the quickest, within 24 hours.

Citibank’s folly entails unique chutzpah.  In exchange for opening new accounts, customers get frequent flyer miles which turn out to be taxable. In the 1099s Citibank sent to recipients it put the value of each mile at 2.5 cents each. Tax expert Dominic Daher, reports FORBES, puts the fair market value at about a penny.  The bottom-uppers got the attention of not only FORBES but also the LOS ANGELES TIMES and U.S. Senator Sherrod Brown, a Democrat from Ohio.  Banking customers being offered incentives have to be warned to read the small print. That small print will have to be worded in people talk, not legalese.  It will also have to be detailed, as in, "If you receive 100,000 miles whose fair market value is determined to be 2.5 cents each, you could have additional income of $2500 which is taxable and will be taxed at your specific tax rate ."

Citibank is back lending money.  So it will probably make it through this one.  The people like banks which lend.  The bank may or may not apologize.  But who really cares that much since there are definite signs of recovery. Its stock closed last week at 33.54, up 4.85 percent.  

However, it isn’t sitting pretty.  No public company is.  Any of them could do something someday that the bottom-uppers won’t let slide.  Their response constitutes the new kind of entertainment for the 21st century: revolution as theatre.

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