Daylife/AP Photo used by permission
Citigroup has been given the go-ahead by the US treasury to repay its $20bn of government bailout money, a day after President Barack Obama accused Wall Street institutions of handing back funds simply in order to escape curbs on multimillion dollar bonus payouts.
The US bank, which teetered on the brink of collapse at the height of the financial crisis last year, is one of the few major US banks still supported by taxpayers’ funds. Its repayment plan follows a similar move earlier this month by Bank of America, leaving Wells Fargo as the last nationwide bank yet to institute repayment.
In total, the treasury pumped $45bn into Citigroup to prevent the bank from collapsing, although $25bn of this was converted into a 34% stake. The government, which has benefited from a 20% appreciation in Citigroup’s share price, said it will sell its shares in an “orderly fashion” over the next 12 months.
The plunge in Citigroup’s fortunes during the worst of the crisis was so severe that the bank was ejected from the blue-chip Dow Jones Industrial Average. Its share price slipped 4% on Monday as investors anticipated dilution in their holdings by Citigroup’s plan to issue a large amount of new stock.
I don’t give investment advice – though I’ve been having a good year – so, I have no suggestions about how to treat Citi’s stock issue.
I’m certainly pleased to see that taxpayers will be making 20% on our share of this TARP bailout.