Feds to sell bank stocks and make a profit

[RecycleMichael]

http://www.nydailynews.com/money/2010/03/29/2010-03-29_us_treasury_department_to_sell_77b_stake_in_citigroup_aquired_during_bailout.html


Treasury Dept. to sell its stake in Citigroup acquired during bailout, may make $7.5 BILLION profit


The Treasury Department said Monday it will begin selling the stake it owns in Citigroup Inc., which could result in a profit to the government of about $7.5 billion. The government received 7.7 billion shares of Citigroup in exchange for $25 billion it gave the bank during the 2008 credit crisis. It said it will sell the shares over the course of this year, depending on market conditions.

Like any investor, the government will likely hold on to its shares if prices fall steeply. However, Citi shares have steadily been rising with the broader market in recent months, which means the Treasury Department stands to pocket a hefty profit.

The government has been trying to unravel the investments in made in banks under the $700 billion Troubled Asset Relief Program, or TARP, that came in at the height of the financial crisis. Citi, one of the hardest hit banks during the credit crisis and recession, received a total of $45 billion in bailout money, one of the largest rescues in the program. Of the $45 billion, $25 billion was converted to the government's ownership stake in the bank.

The Treasury paid $3.25 a share for its stake.New York-based Citi repaid the other $20 billion it owed the government in December.

The Treasury had been planing to sell 20 percent of its stock at the time when Citi was selling new shares late last year. At a price of $3.15 a share, the government would have lost $158.7 million on the sale, so it opted not to participate in the deal at that time but to unload all of its 7.7 billion shares over the course of this year.

Citi shares fell 8 cents to $4.23 in morning trading Monday. The government would make about $7.5 billion in profit on its stake in Citigroup if it sells the stock for that price.

When Citigroup agreed to repay the $20 billion in loans it still owed the Treasury Department, the pair also agreed the Treasury would sell the common stock it owned in the New York bank throughout 2010. The Treasury owns about 27 percent of Citigroup's outstanding stock, based on the number of shares that were outstanding on Jan. 31.

Even after it sells its stake in Citigroup, the Treasury Department will still hold warrants to purchase future shares in the bank. The Treasury said Monday that Morgan Stanley will handle the sale of the shares.

[RecycleMichael]

Government making a profit...what a concept.

[Gaspar]

Show's very promising outlook from the FED.  It's a great sign if accurate.

[sgrizzle]

Government making a profit...what a concept.

Looks like a $17.5 Billion dollar loss to me. Of course, that is the government's version of "profit."

[RecycleMichael]

Looks like a $17.5 Billion dollar loss to me. Of course, that is the government's version of "profit."

I guess your math skills are different than mine.

The feds gave them $25 billion for shares of stock that are now worth $32.4 billion and the feds are selling the stock.

Where is the loss to the feds?

[Conan71]

I guess your math skills are different than mine.

The feds gave them $25 billion for shares of stock that are now worth $32.4 billion and the feds are selling the stock.

Where is the loss to the feds?

The $25 mil in commissions to Morgan-Stanley 

[sgrizzle]

I guess your math skills are different than mine.

The feds gave them $25 billion for shares of stock that are now worth $32.4 billion and the feds are selling the stock.

Where is the loss to the feds?

I thought it said $7.5B was the proceeds from the sale.

However, upon re-reading, we gave them $45B so we're still not going to come out ahead.

[Gaspar]

I thought it said $7.5B was the proceeds from the sale.

However, upon re-reading, we gave them $45B so we're still not going to come out ahead.

Actually Scott, they paid $20b of that back already. 

[nathanm]

However, upon re-reading, we gave them $45B so we're still not going to come out ahead.

We are profiting (on this deal standing alone), since they repaid the $20 billion already. That, of course, presumes the share price remains high enough.

I think we can all agree this is a positive sign.

[we vs us]

I think we can all agree this is a positive sign.

*spit take*

Been posting here much?

[Gaspar]

We are profiting (on this deal standing alone), since they repaid the $20 billion already. That, of course, presumes the share price remains high enough.

I think we can all agree this is a positive sign.

I do agree.  Very positive.  This reflects the outlook of the federal reserve.

Now, we just need to be hopeful that it's accurate.  Current track record is not so good.



I'm hopeful this was not a recommendation from TurboTax Government Editiontm

[nathanm]

Now, we just need to be hopeful that it's accurate.

You can do the arithmetic yourself and verify the accuracy of the claim. (Presuming Citi's share price doesn't tank again)

[Gaspar]

You can do the arithmetic yourself and verify the accuracy of the claim. (Presuming Citi's share price doesn't tank again)

Wasn't talking about the number.  I was talking about the market outlook. 

[nathanm]

Wasn't talking about the number.  I was talking about the market outlook. 

Ah, sorry, didn't catch that.