He’s had to endure the sight of less sub-primed competitors like Goldman Sachs and JP Morgan announcing fabulous profits last week; Citi did post a $1.6bn profit, but this figure was buoyed by a weird accounting rule that debt declining in value must be valued at market rates, leading to an artificially inflated earnings figure; it also got bolstered by selling off units, 22 of which have gone since the crisis began. There were still $7.3bn of absorbed bad assets last quarter bringing the total since the crisis began to $39bn, and with unemployment as it is, that’s only going to continue.

But despite this, all the banks’ incumbent directors got re-elected, including Pandit, who said: “I intend to see this through because there is not more important place to be than Citi”. Fair enough maybe, as Pandit is a relative newcomer and recently bought 850,000 shares in the bank as a show of solidarity, but why on earth have shareholders re-elected auditors like John Deutch (pictured above with the word “catastrophe” looming behind him), Alain Belda, and C. Michael Armstrong, who in the Charles Prince era all oversaw Citi’s purchase of the CDOs that ended up crippling the bank?

Deutch is a chemist by trade, who was refused ongoing access to top secret documents when he was head of the CIA after he left them on his home computer – not exactly screaming “prudence” or “diligence” is it? And why has a chemist been given auditing responsibilities at director level of Citigroup anyway? Meanwhile Armstrong is the bozo who mismanaged AT&T’s expansion into cable and broadband, prompting the company, saddled with $60bn debt, to sell off its newfound assets at a loss. And the lead director, Alain Belda, is the former head of Alcoa who managed to lose Alcan to Rio Tinto last year; he’s still on the board at Alcoa, and given the current plight of the company, will he see his Citi position as anything but an extra title and income?

Do the shareholders actually ever want to see a dividend again? Because by re-electing these dinosaurs (Belda’s 65, the others over 70) who don’t know an SIV from an SUV, that’s not what’s going to happen. Plus Citi are still paying directors who have left, but are trying to show restraint by not providing coffee and doughnuts. Did everyone have a bowl of crazy for breakfast yesterday?

There were some vocally pissed-off shareholders to be fair. “If we had the right to vote for somebody else, anybody else, I don’t care even if it was Bernie Madoff, he’d do a better job than the current board”, said one; “thank God you’re gone”, shouted another at the departing board members. But for every angry shareholder, there were two more ready to ignore the professional advice and mumble something about stability and allowing the status quo to go unchallenged. Well, it’s your funeral!

It’s going to go under an Initial Public Offering, ie on the stock market, which seems weird considering that the markets’ moods are less predictable than a teenager’s at the moment, and no-one’s been doing any IPOs over the last few months. But the floatation won’t happen until 2010, so it’ll get a headwind of hype and excitement, maybe even a bidding war from buy-out firms prepared to pay over the eventual valuation. Given the popularity already of the Skype iPhone app, we can presume that the brand will be all the stronger come next year. Though Martin Peers at the Wall Street Journal suggests that growth will be limited thanks to calls being free, and that given Skype made $116m profit last year, the $1.7bn that eBay will want for it seems like a lot.

Even if they do get that much for it, it’s still a hefty loss for eBay on their original investment. eBay has also just announced it’s selling back web recommendation service StumbleUpon to its original owners, after they bought it for $75m back in 2007. “We realized there were few long-term synergies between the two businesses”, said StumbleUpon founder Garrett Camp. So “lack of synergy” seems to be a running theme here – eBay, flush from its brilliant core business, thought it should and could move with the times, or at least be seen to be doing so. But now they’re having to turn back to the auctions, something they should never have strayed from in the first place.

eBay resisted a buyback offer from Skype founders Niklas Zennstrom and Janus Friis, who look like an attendee at a caravan trade show and a trance producer respectively; they had pulled together a group of private equity firms to fund the purchase. The Guardian suggests that thanks to a beef over the Global Index technology that the pair licence to Skype, eBay is snubbing Zennstrom and Friis with the IPO. Take that, Scandos!

Maybe Zennstrom and Friis can now concentrate on turning the Joost platform they invested in into a viable TV equivalent of fellow Scandinavian ad-funded success story Spotify. At the moment it’s good for cartoons, the softest of porn, and little else, but surely has the potential to be massive. Maybe they could try and steal the music video market off YouTube while it festers in copyright law hell?

Now we can add the bailout of AIG to that list.  

A recent article by the blogger Tyler Durden (think Brad Pitt) from Zero Hedge concerning the unwinding of AIG’s contracts is receiving a lot of attention – even USA Today commented on it. ZH claims the recent announcements by major banks like Bank of America, JP Morgan Chase and Citigroup that they were profitable during the first quarter of this year is a sham, and that the only reason the banks were able to turn a profit was because of some egregiously low pricing from AIG’s financial products arm.  

ZH received a letter from an insider at AIG claiming that the company is unwinding “whole portfolios” rather than single deals. For the major banks, this allowed them to pick up a massive number of AIG’s assets for pennies on the dollar. It also allowed them to run to the media with profits in hand. The stock market reacted accordingly and went on a mini bull-run.  

The rational explanation is that what we’re seeing is a fire sale. AIG is doing whatever it can to wipe assets off its balance sheets in a semi-orderly fashion. In fact, that was the reason the government decided to bailout AIG rather than Lehman Brothers. The conventional wisdom was that AIG couldn’t be allowed to fail, as it was simply too big and too diverse. The government agreed to step in and help AIG pursue an orderly sale of its assets; this, it said, would mitigate the damage to the financial system. Taxpayers – considering they understood very little on credit default swaps and collateralized debt obligations – accepted the government’s explanation and said ‘get on with it’.  

Enter the conspiracy theorists. If the government is willing to allow AIG to perform a fire sale on its assets, why then did it allow the insurance giant to use taxpayer money to pay full value to its counterparties? Shouldn’t these counterparties have suffered some sort of loss, considering they also played a major role in the financial circus that brought AIG to its knees? Why, now, are many of these very same counterparties allowed privileged access to AIG’s vault?  

The conspiracy theorists say it’s all part of some larger plot – as any good conspiracy theory does. They point out that the ties between Washington and Wall Street run deep (cue the Goldman Sachs conspiracy). The government knew perfectly well what would happen with the money it dumped into the AIG garbage disposal – it would be spat out onto the balance sheets of the major banks. The conspiracy theorists say the furor over the bonuses being handed out to AIG executives is simply a ‘straw-man’ distraction to the truly massive bonuses that were awarded to the Wall Street firms. Keep the population focused on the $150 million or so given to AIG executives, so they won’t notice the $100 billion handed out to major banks. Eliot Spitzer lays it out. 

The undercurrent to the ZH article is that AIG has become nothing more than a funnel for the government to dump taxpayer money into the pockets of greedy Wall Street executives. And because the details of what’s actually going on between the government, AIG, and Wall Street are so murky, articles like the one by ZH are gaining traction. Furthermore, as Simon Johnson, the former chief economist at the IMF, points out in an article in the Atlantic, it’s starting to appear that the banks are the ones actually dictating the terms to the government. This simply adds to the belief that the recent cash injection through AIG to the nation’s major banks looks more like a gambler paying off his loan shark than a way to avoid a financial meltdown.   

Conspiracy theories thrive on ambiguity, contradictions and, most importantly, tight-lipped government agencies. Area 51 is probably the most potent example of this, and the notorious secrecy surrounding Dick Cheney and company laid the foundations of the 9/11 conspiracy theory catalogue. The current economic crisis is no different. The complexity of the financial instruments involved in the subprime meltdown and intricacies of the modern financial system certainly aren’t helping, but the government’s inability to make clear exactly what’s happening is, without question, adding fuel to the conspiratorial fire.