Citibank Bailout Leads to Share Sales

March 31, 2010

Citibank Bailout Leads to Share Sales

The treasury department has announced that about 18 months after bailing out Citigroup that it plans to sell its common shares in Citigroup throughout 2010. This will reduce the 27 percent ownership that the government controls through the sale of these shares to investors. The bailout and recovery of Citibank is a success story as far as the government is concerned.

If these shares were sold off all at once the government would earn around $8 billion of profit plus an additional $8 billion from the interest payments and other fees. That action would make the Citigroup action one of the most lucrative investments made as part of the Troubled Asset Relief Program.

However the treasury has announced that it intends to sell these shares in an “orderly and measured fashion”, which means of course no sudden $8 billion profit for the government. Instead the shares will be sold at market value which means that the government will be able to take advantage of the stock market variances to earn as much as possible from the sales of Citigroup stock.

The government holds 7.7 billion shares of Citigroup stock and the investment of the government that invested $45 billion of taxpayer money and insured $300 billion in assets stabilized Citigroup when it was on the edge of collapse. Over the course of the past 18 months Citigroup has improved financially and was able to repay $20 billion of the bailout funds and ended the federal insurance that was part of the bailout in December of 2009.

Once these shares are sold and the government and treasury has withdrawn from Citigroup the hope is that Citigroup is financially stable enough at this point to continue to act responsibly and not end up on the edge of disaster again.

The ability of Citigroup to continue without government assistance is a positive step in the business world, which shows that the government investments and bailout actions generated profits for taxpayers and helped get a large bank back on its feet.

The recovery of our nations economy has been in doubt for the past few years, and positive steps such as the bailout of Citigroup, and now the withdrawal of the government from this bank are proof that the bailout plan was effective and that our economy can be improved slowly but surely as more companies get on their feet and are able to repay the government and have their shares distributed back to investors.

Publisher: Salient News