Government will earn US$12 billion on Citigroup shares
By Martin Crutsinger |
December 8, 2010, Wednesday
|
Print Edition
Print Edition
THE United States government said late on Monday it had reached a deal to sell its remaining holdings of Citigroup common stock and will end up turning a profit of US$12 billion on its bailout of the giant bank.
The Treasury Department said that a final offering of about 2.4 billion shares of Citigroup Inc common stock had been priced at US$4.35 per share. With the proceeds of the sale, the government will have realized US$57 billion on its bailout package for the big bank.
Citigroup received US$45 billion in taxpayer support late in 2008 in one of the largest bank rescues as the government struggled to contain the worst financial crisis to hit the country since the 1930s.
The bailout of Citigroup and other large banks was begun under the administration of George W. Bush but turned into a major political liability for President Barack Obama in last month's congressional elections.
Republicans took control of the House of Representatives and gained six seats in the Senate by capitalizing on voter anger over the bailouts and soaring federal budget deficits.
The administration has insisted that the bailouts were needed to prevent an even deeper recession. They said the cost of the bailouts has been falling as Citigroup and other rescued institutions pay back their government loans.
The latest estimate from the Congressional Budget Office in late November was that the US$700 billion Troubled Asset Relief Program would end up costing the government US$25 billion, down from an August CBO estimate of US$66 billion.
Of the US$45 billion in taxpayer support provided to Citigroup, US$25 billion was converted to a government ownership stake that the Treasury has been selling off since last spring. The bank repaid the other US$20 billion in December 2009.
Treasury said that with the pricing of the last 2.4 billion shares of common stock on Monday, it would receive US$31.8 billion from plus another US$2.9 billion in interest and dividends.
The US$57 billion total also includes US$20 billion from Citigroup's December 2009 repayment of TARP money and another US$2.2 billion from the sale of trust preferred securities held by the government.
The actual earnings are expected to climb with the sale of an additional US$800 million in trust preferred securities held by the Federal Deposit Insurance Corp and the sale of warrants Treasury holds.
The Treasury Department said that a final offering of about 2.4 billion shares of Citigroup Inc common stock had been priced at US$4.35 per share. With the proceeds of the sale, the government will have realized US$57 billion on its bailout package for the big bank.
Citigroup received US$45 billion in taxpayer support late in 2008 in one of the largest bank rescues as the government struggled to contain the worst financial crisis to hit the country since the 1930s.
The bailout of Citigroup and other large banks was begun under the administration of George W. Bush but turned into a major political liability for President Barack Obama in last month's congressional elections.
Republicans took control of the House of Representatives and gained six seats in the Senate by capitalizing on voter anger over the bailouts and soaring federal budget deficits.
The administration has insisted that the bailouts were needed to prevent an even deeper recession. They said the cost of the bailouts has been falling as Citigroup and other rescued institutions pay back their government loans.
The latest estimate from the Congressional Budget Office in late November was that the US$700 billion Troubled Asset Relief Program would end up costing the government US$25 billion, down from an August CBO estimate of US$66 billion.
Of the US$45 billion in taxpayer support provided to Citigroup, US$25 billion was converted to a government ownership stake that the Treasury has been selling off since last spring. The bank repaid the other US$20 billion in December 2009.
Treasury said that with the pricing of the last 2.4 billion shares of common stock on Monday, it would receive US$31.8 billion from plus another US$2.9 billion in interest and dividends.
The US$57 billion total also includes US$20 billion from Citigroup's December 2009 repayment of TARP money and another US$2.2 billion from the sale of trust preferred securities held by the government.
The actual earnings are expected to climb with the sale of an additional US$800 million in trust preferred securities held by the Federal Deposit Insurance Corp and the sale of warrants Treasury holds.
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