Monday, December 7, 2009
Big surprise -- Citigroup and banking regulators disagree on bailout repayment
From Washington comes word that it could be months before U.S. government banking regulators allow banking giant Citigroup to repay billions of dollars it took from taxpayers in three separate capital bailouts last year and in 2009. Citigroup wants to escape from the tight regulatory regime imposed on it after the bank accepted taxpayer money to stay afloat during the height of the economic downturn, but the multifaceted rescue has made repayment an unusually complex process, according to the Reuters international news service. While rival Bank of America's proposed path out of the Troubled Asset Relief Program involves the raising of some $20 billion to repay the government, Citigroup must figure out how to let the government sell 7.7 billion shares of stock it owns -- nearly a third of outstanding shares -- and how much to pay for the U.S. guarantee of $182 billion worth of bank securities. The government never purchased Bank of America stock and never signed an agreement to protect its assets, Reuters said. In light of Federal Deposit Insurance Corp. Chairman Sheila Bair's statement that the government would have to "be very careful" in allowing banks to buy their way out of TARP, and the array of agencies that would have to sign off on Citigroup's exit, the timeframe is most likely months, rather than weeks, Reuters said. Knowing all this, and understanding how much taxpayers have paid and will paying in the future to keep Citigroup around -- since the bailout funds were borrowed money -- it doesn't make sense for the financial institution to argue with regulators who are the only reason the bank is still around.