U.S. Profit from Citigroup Bailout: $12 Billion

The Citigroup bailout is officially over: The Treasury sold the last of its shares, netting a total profit of $12 billion on the $45 billion bailout.After all is said and done, taxpayers will make a $12 billion profit on the government's $45 billion bailout of Citigroup (C).

The Treasury Department said late Monday that it had struck a deal to sell its remaining holdings in Citigroup common stock, about 2.4 billion shares. With the proceeds of the sale, priced at $4.35 a share, the government will have realized $57 billion on its bailout package for the big bank.

"By selling all the remaining Citigroup shares today, we had an opportunity to lock in substantial profits for the taxpayer and avoid future risk," said Tim Massad, the Treasury official who heads up the bailout program.

Citigroup received $45 billion in taxpayer support late in 2008 in one of the largest bailouts undertaken by the government as it struggled to contain the worst financial crisis to hit the country since the 1930s.

Bank Bailout Cost Falling

The bailout of Citigroup and other large banks was begun under the Republican 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 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 $700 billion Troubled Asset Relief Program would end up costing the government $25 billion, down from an August CBO estimate of $66 billion.

Of the $45 billion provided to Citigroup, $25 billion was converted to a government ownership stake that the Treasury has been selling off since last spring. The bank repaid the other $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 $31.8 billion from the sale of common stock plus another $2.9 billion in interest and dividends.

The $57 billion total also includes $20 billion from Citigroup's December 2009 repayment of TARP money and another $2.2 billion from the sale of trust preferred securities held by the government.

Earnings Expected to Climb

The actual earnings are expected to climb with the sale of an additional $800 million in trust preferred securities held by the Federal Deposit Insurance Corp. and the sale of warrants Treasury holds. The warrants give the holder the right to buy Citigroup common stock at a specified price.

Treasury had disposed of about 5.3 billion shares at an average price of $4.05 before Monday's pricing of the remaining shares. With the pricing of $4.35 for the shares offered on Monday, Treasury's average price for its entire 7.7 billion shares of common stock will turn out to be $4.14.

Citigroup common stock closed at $4.45 in trading Monday and has ranged from a low of $3.11 to a high of $5.07 over the past 52 weeks.

Monday's deal, for which Morgan Stanley acted as bookrunning manager, is expected to close on Friday, Treasury said. Citigroup is paying the underwriting fees.

"Selling off the remaining stake ensures that taxpayers will book a healthy profit on the Citigroup investment," said Linus Wilson, a professor of finance at the University of Louisiana at Lafayette.


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Joe Kay

If the US PROFIT IS $12 BILLION. What was the cost to taxpayers ? What is the break down, don't just give one number it is no answer. H J Kay

December 08 2010 at 7:59 AM Report abuse rate up rate down Reply
blan444444

How much did Citi make sitting on the millions and placing in government funds until they had to pay back...1% with no risk and not loaning to spur the economuy was just a way to pay the big boys..

December 07 2010 at 5:03 PM Report abuse rate up rate down Reply
todfrapri

IRONIC ISN'T IT? FOR THE FIRST TIME YOU SEE GEORGE BUSH'S NAME ATTACHED TO THE BAIL OUT. REPUBLICANS USED THIS BAIL OUT OF WALL STREET TO ATTACK DEMOCRATS AND OBAMA. NOW THAT THE OBAMA ADMINISTRATION TOOK OVER AND WISELY ADMINISTERED THE MONIES THAT THAT PAULSON AND BUSH RECKLESSLY GAVE AWAY BUSH'S NAME SUDDENLY APPREARS AS IF TO TAKE CREDIT. BUT NOW WHERE AROUND WHEN PEOPLE WERE USING IT FOR BLAME. INTERESTING

December 07 2010 at 12:36 PM Report abuse +2 rate up rate down Reply
carl

Think before you vote next time

December 07 2010 at 11:44 AM Report abuse +2 rate up rate down Reply
gttdux

Without a proper audit trail, how do we know anything about thes "paydowns" of gov't loans. Its great PR for future justification of taxpayer bailouts without any facts to support the conclusion. Electronic transfers can so easily be reversed. I simply don't trust the US Gov't, The Fed, The Treasury, or any of the ex-WallStreet crowd running any of these operations - would not be surprised to find that treasury is paying bonuses to top appointees these days !!!

December 07 2010 at 10:45 AM Report abuse -1 rate up rate down Reply
jcrvac

LETS CALLL OUT ALL DOES POLICY MAKERS THAT SAY WE WILL NEVER SEE OUR TAX MONEY. IT TIME TO SAY YOU WHERE WRONG. LAST MAN STANDING

December 07 2010 at 10:44 AM Report abuse +1 rate up rate down Reply
soopershrink

Does anyone actually believe this garbage???? What about all of the overvaluing and all the other accounting tricks the banks and insurance companies like AIG used because they "too big to fail"" and how did all the hundreds of millions of bonuses that they paid to their top thieves so that the corperations could keep their "talant" because they know how to fail. Hey I can fail for a whole lot less than that< five or ten million will do me just fine and if I fail after that I'll take my lumps. Just think, if the government were to have recegnized that if thoy are too big to fail you're too big to exist, all that bailout money plus the bonuses plus the tax breaks for the megga rich were applied to the debt, we might be out of the whole. But no all of the little tax payers have to tollerate the insult added to the numerous injuries of being once again being pissed on and told that its raining again!!!!!!!!

December 07 2010 at 10:33 AM Report abuse -2 rate up rate down Reply
pemphantom

Will the govt profit be used to reduce the deficit or invested in another one of those "redistribution of wealth" progrms?

December 07 2010 at 10:21 AM Report abuse -1 rate up rate down Reply
pemphantom

I guess Obama will now take the credit for the Bush initiated TARP fund?

December 07 2010 at 10:18 AM Report abuse -1 rate up rate down Reply
Iselin007

They ain't no Mary Poppins now be ready to run theys a comin to git ya!

December 07 2010 at 9:23 AM Report abuse +1 rate up rate down Reply