At the peak of the credit crisis in 2008 the government received 7.7 billion shares of Citigroup in return for $25 billion, and was repaid the $20 billion loan last December (TARP).

Late last year Citigroup announced millions of new shares to sell and at that time the government considered selling its stake as well. However, the treasury paid $3.25 a share and with the price at $3.15 a share the government would have lost $158.7 million so they backed out and decided to sell their shares systematically based on market conditions.

If the government is able to sell their stake at $4.25 a share they will earn $7.7 billion profit. Additionally, Morgan Stanley will handle the sale of those shares.

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From Linkedin:

One hypothesis is that many of the employees left the financial industry. According to the LinkedIn data set, that just isn’t true. There are a handful of people that did transition to other industries and start new careers, but most stayed in the financial space. To be specific, other than two acquiring companies (Bank of America acquired Merrill Lynch and Nomura acquired Lehman Brothers’ franchise in the Asia Pacific region), Barclays was by far the biggest beneficiary, scooping up 10% of the laid off talent, followed by Credit Suisse at 1.5% and Citigroup at 1.1 %.

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From the WSJ: Obama Proposes New Bank Regulations

The White House wants commercial banks that take deposits from customers to be barred from investing on behalf of the bank itself—what’s known as proprietary trading—and said the administration will seek new limits on the size and concentration of financial institutions.

… Banks shielded from risk through federal-deposit insurance, or aided in financial crises by low-interest loans from the Federal Reserve Board, would no longer be allowed to engage in trading unrelated to their customers’ interests, one senior administration official said.

Under the proposed rule, commercial banks would be prohibited from owning, investing in or advising hedge funds or private equity firms. Bank regulators would not be simply given the discretion to enforce such rules. They would be required to do so.

…
Administration officials said they also want to toughen an existing cap on bank market share. Since 1994, no bank can have more than 10% of the nation’s insured deposits. The Obama administration wants that cap to include non-insured deposits and other assets.

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“Citigroup Inc. became the latest bank to take a cautious view of consumers’ credit problems, reporting a $7.77 billion fourth-quarter loss due to failed loans and the costs of repaying $20 billion in government bailout money.”

“The bank’s loss after accounting for payment of preferred dividends came to almost $7.77 billion, or 33 cents per share. That compared with a loss of $18.16 billion, or $3.40 a share, a year earlier. In the third quarter of 2009, it lost $3.24 billion after paying dividends. The latest results were in line with analysts’ expectations, according to Thomson Reuters.”

“….But paying the government back also frees Citigroup of restrictions on how much it can pay its employees.”

“Gerspach said average compensation per employee, which includes salary, benefits and bonuses, in 2009 was about $90,000, about 1 percent lower than in 2008. In total, Citigroup spent $25 billion on compensation costs in 2009, down 20 percent from the year before. The average compensation per employee did not decline as fast because of the job cuts.”

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Brief Rundown;

Citi is to repay $20 billion in TARP Trust Preferred Securities with money from private investors.

Citi will raise $17 billion by selling stock.

Citi will issue $7.2 billion in other capital by the first quarter of 2010.

The U.S. government owns 34% of Citigroup and will begin selling its stake starting with its first sale of $5 billion worth of shares in the coming weeks.

With Citigroup’s announcement today, it seems that the financial markets are recovering faster than anticipated.

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