Citigroup strikes deal to repay TARP

Bank says it will return $20 billion in bailout money through combination of stock and debt offerings.

EMAIL  |   PRINT  |   SHARE  |   RSS
google my aol my msn my yahoo! netvibes
Paste this link into your favorite RSS desktop reader
See all RSS FEEDS (close)
By David Ellis, staff writer

Citigroup staffers will no longer be subject to government pay restrictions as a result of Monday's announcement.
How would you describe the Obama administration's policy toward major banks?
  • Too easy
  • Too tough
  • Appropriate

NEW YORK ( -- Citigroup said Monday it has struck a deal with the government to return $20 billion in bailout money to taxpayers.

The New York City-based lender said it would raise the money through a combination of stock and debt, the bulk of which would come from a $17 billion common stock offering.

The announcement by Citigroup comes as top bank CEOs rendezvous in Washington with President Obama to discuss a variety of issues, including lending and regulatory reform efforts for the financial industry.

Citigroup became one of the biggest recipients of bailout money last year after the government injected $45 billion into the company to help stabilize the embattled lender.

Concerned about the company's underlying health and ability to endure future loan losses, the government converted $25 billion of its preferred-stock stake in the company into common stock over the summer. That effectively gave U.S. taxpayers a 34% stake in one of the world's largest financial institutions.

Citigroup said Monday that the government would get rid of those shares, starting with the sale of $5 billion worth of stock. The remaining shares would be sold "in an orderly fashion" over the next 6 to 12 months.

Citigroup (C, Fortune 500) shares tumbled 5% in morning trading Monday.

The company also said it was terminating the loss-sharing agreement it had struck with regulators in November in which the government agreed to backstop some losses against some $250 billion in troubled assets.

Citigroup CEO Vikram Pandit said his firm owed American taxpayers "a debt of gratitude" for propping up the firm earlier this year, adding that it would continue to help the nation's economy get back on track by extending loans and offering assistance to homeowners in need.

"By any measure of financial strength, Citi is among the strongest banks in the industry, and we are in a position to support the economic recovery," Pandit said in a statement.

As a result of Monday's announcement, Citigroup becomes the latest bank to return bailout money to taxpayers.

Lenders have been scrambling recently to pay back money received under the Troubled Asset Relief Program, or TARP.

Last week, Bank of America (BAC, Fortune 500) returned the $45 billion it received from the government, bringing the total amount of money recouped from the Troubled Asset Relief Program, or TARP, to $116 billion. Roughly $205 billion still remains invested in the industry overall.

Much of the repayment has been driven by fears about ongoing government restrictions, including caps on pay packages for executives at the nation's largest bailout firms.

On Friday, White House "pay czar" Kenneth Feinberg capped base salaries for 75 Citigroup executives at $500,000 for the remaining three weeks of 2009. Those changes were expected to serve as the model for their pay next year as well.

But, by paying back the bailout, Citigroup will no longer be required to submit pay packages for its executives to the government for approval.

Citigroup's announcement, while encouraging for taxpayers, is expected to push the company even deeper into the red when it delivers its fourth-quarter results on Jan. 19. Analysts are currently expecting the company to report a loss of $1.1 billion, according to Thomson Reuters. To top of page

They're hiring!These Fortune 100 employers have at least 350 openings each. What are they looking for in a new hire? More
If the Fortune 500 were a country...It would be the world's second-biggest economy. See how big companies' sales stack up against GDP over the past decade. More
Sponsored By:
More Galleries
10 of the most luxurious airline amenity kits When it comes to in-flight pampering, the amenity kits offered by these 10 airlines are the ultimate in luxury More
7 startups that want to improve your mental health From a text therapy platform to apps that push you reminders to breathe, these self-care startups offer help on a daily basis or in times of need. More
5 radical technologies that will change how you get to work From Uber's flying cars to the Hyperloop, these are some of the neatest transportation concepts in the works today. More
Worry about the hackers you don't know 
Crime syndicates and government organizations pose a much greater cyber threat than renegade hacker groups like Anonymous. Play
GE CEO: Bringing jobs back to the U.S. 
Jeff Immelt says the U.S. is a cost competitive market for advanced manufacturing and that GE is bringing jobs back from Mexico. Play
Hamster wheel and wedgie-powered transit 
Red Bull Creation challenges hackers and engineers to invent new modes of transportation. Play

Most stock quote data provided by BATS. Market indices are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer. Morningstar: © 2018 Morningstar, Inc. All Rights Reserved. Factset: FactSet Research Systems Inc. 2018. All rights reserved. Chicago Mercantile Association: Certain market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. Dow Jones: The Dow Jones branded indices are proprietary to and are calculated, distributed and marketed by DJI Opco, a subsidiary of S&P Dow Jones Indices LLC and have been licensed for use to S&P Opco, LLC and CNN. Standard & Poor's and S&P are registered trademarks of Standard & Poor's Financial Services LLC and Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC. All content of the Dow Jones branded indices © S&P Dow Jones Indices LLC 2018 and/or its affiliates.