The Recession

Bailout Paying Off: Taxpayers to Make $7.5 Billion From Citi Shares

| by Mark Berman Opposing Views

There was much criticism when the government bailed out big banks under the TARP plan. Well, that criticism may be quieted a bit, considering the government is set to make a huge windfall from the sale of stock in Citigroup.

Citi received $45 billion -- one of the largest bailouts granted. In exchange for $25 billion in cash, the government received 7.7 billion shares of the company. The agreement was that when Citi paid back the other $20 billion, the government would sell its shares. The money was paid back in December.

So the Treasury Department said Monday it will begin selling its Citi shares. The government paid $3.25 per share. At its current price of $4.23, the government stands to make a profit of around $7.5 billion.

The Treasury 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 along with the broader market in recent months.

The Treasury actually 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.