The Federal Reserve and the FDIC are taking a hard line than the Treasury Department on how much capital Citigroup (NYSE: C) should be forced to raise before the company repays its $20 billion in funds that the company borrowed from the Troubled Asset Relief Program.
The Federal Reserve is considered to be the bank’s primary regulator and the FDIC is insuring more than $300 billion worth of Citigroup’s toxic assets have argued that Citigroup must raise substantial levels of capital before it is allowed to repay its TARP funds, according to the Financial Times of London. At one point, a regulator told Citigroup it might be forced to raise up to $20 billion in new equity before repaying back TARP, a level that would make it almost impossible for the bank to exit the program in the immediate future.
The Treasury Department is taking a much softer stance on the repayment and has generally been more responsive to Citigroup’s arguments that the bank has plenty of cash reserves to repay its TARP debt without raising substantial additional capital.
Citigroup is currently 34% owned by the U.S. government. The bank wants to repay TARP to get out from under pay curbs established by the Treasury Department.
Citigroup’s movements to repay its TARP debt follows Bank of America’s (NYSE: BAC) announcement last week that it plans to repay the $45 billion that it owes to the United States government.
