Government says sale of Citigroup trust preferred sales brings in $2.25 billion

Government gets $2.25 billion for Citigroup shares

WASHINGTON — The government said Thursday it raised $2.25 billion from the sale of trust-preferred shares that it held in Citigroup Inc., moving to recoup the costs incurred in the $700 billion financial bailout.

The Treasury Department also announced it has sold an additional 1.5 billion shares of Citigroup common stock, bringing the total amount it has raised from the sale of Citigroup common stock to $16.4 billion.

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

As a result of the latest sales of common stock, Treasury’s holdings have now been reduced to 3.6 billion shares of Citigroup stock, which represents 12.4 percent of the company’s common stock.

Treasury said in a statement that it expects to continue selling its remaining shares of Citigroup stock “in an orderly fashion” after observing a pause in the sales surrounding the release of Citigroup’s third quarter earnings report.

The Treasury holdings of trust-preferred shares came from the government’s agreement with Citigroup 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 and Treasury was never required to make any payments under the arrangement.

The sale of the trust-preferred shares was 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. Those firms will solicit bids for the securities and will sell off the securities based on the bids received.

That sale was handled separately from the sale of $25 billion in Citigroup common stock owned by the government.

Of the $45 billion in taxpayer support provided to Citigroup, $25 billion was converted to a government ownership stake that the government has been selling off since last spring. The bank repaid the other $20 billion in December 2009.

Treasury said so far the combined proceeds to the taxpayer from Citigroup total $41.6 billion when the repayment, sales of common and preferred stock and dividend payments are all included. The government said that the government’s remaining shares of Citigroup common stock have a value of $14 billion at Thursday’s closing stock market price. Citigroup stock closed Thursday at $3.91 per share.

The government bailout of banks, auto companies and insurance giant American International Group Inc. has 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.