Treasury announces start of sale of $2.2 billion in trust preferred shares of Citigroup

Treasury announces sale of Citigroup shares

WASHINGTON — The government said Wednesday it is starting to sell $2.2 billion in trust preferred shares that it holds in Citigroup, another move to recoup the costs incurred in the $700 billion financial bailout.

The Treasury Department said the pace of the sales would be determined by market conditions.

The $2.2 billion in trust preferred shares were received by the government as part of Treasury’s agreement in January 2009 to share potential losses on a pool of $301 billion of assets held by Citigroup.

The loss-sharing arrangement also involved the Federal Deposit Insurance Co. and the Federal Reserve. Citigroup paid the Treasury and the FDIC a premium in the form of securities for their willingness to share potential losses over a five to 10-year period.

The loss sharing arrangement was terminated in December 2009 at the request of Citigroup. Treasury was never required to make any payments under the arrangement and has no further obligation to do so.

The sale of the trust preferred shares will be handled by a syndicate of Wall Street investment firms including BofA Merrill Lynch, J.P. Morgan, Morgan Stanley, UBS Investment Bank and Wells Fargo Securities. These firms will solicit bids for the securities and will sell off the securities based on the bids received.

The sale of the Citigroup trust preferred securities is being handled separately from the sale of $25 billion in Citigroup common stock that the government owns.

Citigroup received $45 billion in taxpayer support in one of the largest bank rescues by the government in addition to the insurance provided against losses on the pool of $301 billion in assets.

Of the $45 billion, $24 billion was converted to a government ownership stake which the government has been selling off last spring. The bank repaid the other $20 billion in December 2009.

The government bailout of banks, auto companies and insurance giant American International Group Inc. have drawn heavy criticism. Many charge the Wall Street firms that helped lead the country into recession are now reaping big profits while ordinary Americans are continuing to struggle with high unemployment, soaring home foreclosures and a weak economy.