Today, the U.S. Treasury Department announced that it will sell a portion of the $2.2 billion in Citigroup’s (NYSE: C) trust preferred shares it received at the height of the financial crisis.
It now looks like a pretty good deal for the taxpayers, who once cried acrimony at the government’s investment. During January 2009, the Treasury Department agreed to share potential losses at the firm in an attempt to stabilize the system. When Treasury entered the agreement with Citigroup, the Federal Deposit Insurance Corp and the Federal Reserve also joined to offer a kind of insurance against Citigroup losses over a five- to 10-year period. However, since no losses occurred, and no further obligations exist, all proceeds of the sale will be a net gain for the taxpayers.
The actual portion of the $2.2 billion shares to be sold will be dependent on market conditions, as the Treasury plans to sell the securities for no less than par value, including accumulated and unpaid distributions. To make the market, the Treasury has asked Bank of America (NYSE: BAC), JPMorgan (NYSE: JPM), UBS AG (NYSE: UBS), and other major investment banks to act as joint lead managers.
The Troubled Asset Relief Program (TARP) was widely criticized and angered the populist, but in total has been a significant net gain for the government. Should the entire $2.2 billion lot be sold, revenues from the program would stand a $228 billion. As the banking system continues to rebound and share prices climb, the Treasury will end up clearing a tidy profit.
