Government breaks ties with Citigroup
Five years after the financial crisis bailout of Citigroup, the federal government is disposing of its remaining interest in the company, according to Reuters.
FDIC offers bonds for sale
The Federal Deposit Insurance Corp. (FDIC) offered $2.42 billion of Citigroup bonds for sale on Tuesday, according to a filing by the company with the U.S. Securities and Exchange Commission (SEC).
In a statement, Citigroup said, “When the transaction concludes, no U.S. government entity will continue to hold any securities in Citi issued as a result of the financial crisis.”
The securities that were offered on Tuesday were part of a promise made by the government in January 2009 in an effort to assist in supporting the company’s capital by agreeing to share in the losses of Citigroup’s $301 billion worth of assets. The loss agreement followed capital infusions from the government in the amount of $25 billion during October 2008 and $20 billion in December 2008.
History behind the securities being offered for sale
In return for the loss-sharing assistance offered by the Treasury, Citigroup issued about $4 billion of its perpetual preferred stock and gave more than $3 billion of its preferred stock to the FDIC.
New York-based Citigroup was one of the banks to suffer the worse blow during the financial crisis. The Treasury Department bailed out Citigroup with $45 billion, a large sum in the rescue program. Citigroup did repay the bailout later.
Citigroup received most assistance during the bailout
Although the federal government assisted multiple banks, Citigroup received more assistance than any other U.S. bank during the crisis. The Citigroup sale by the FDIC this week is about three times larger than a similar sale back in February for the government, which took care of $894 million in debt. The government has sold other securities it obtained in exchange for the bailouts.
“We remain very appreciative of the support provided by the U.S. Treasury, FDIC and American taxpayer during the financial crisis and are pleased that their investment realized a return of more than $13 billion,” the company’s statement said.
Citigroup shares are up
Citigroup’s shares were up 2.1 percent for the day, trading at $51.14 on the stock exchange. However, they were down 89 percent from where they were five years ago. The notes carry a maturity date of 2025 and 2043. However, Citigroup will not obtain any proceeds from the sale.