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  • Citigroup Inc. (NYSE:C) Preferred Shares being Sold by Uncle Sam

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    Wednesday Sept. 29, 2010 at 08:19 pm EST
    Treasury will be selling Citigroup Inc. (NYSE:C) Preferred Shares 
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    The Wall Street Journal and Bloomberg reported that the government, in the latest effort to repay taxpayers for public rescue of the bank, is planning to sell some portion of 2.2 billion dollar worth of Citigroup securities. Citigroup handed over the U.S. Treasury the $2.2 billion of trust preferred securities, which includes both stocks and bonds, in trade for the government's providing a safety net for 301 billion dollars of the bank's assets. The government guarantee was in addition to a $235 billion in available funds and $45 billion investment, for a government bailout totaling $280 billion.Bloomberg says, the agreement had ended in December and Treasury never needed to compensate Citi for the insured assets. The government stands to profit from the asset guarantee agreement with the securities still in its possession.

    But the Financial Times had reported earlier this week that the government is still having trouble reducing that stake because it still owns just under a fifth of the bank. The government owned about 5.1 billion shares or 18 percent according to Bloomberg and the WSJ as of July 1. According to the FT at the end of August, the government owned about 4.2 billion shares or 17 percent. This decline in trading volume seems to make it unlikely that the government will be able to sell all its shares, unless it takes any extreme decision to sell them all at once.

    The Wall Street Journal also reported regarding the government's plan to repay taxpayers for the rescue of AIG. AIG chairman Steve Miller reported to the WSJ that there is a meeting of insurer's board on Wednesday to come up with a plan that will allow the government to sell its AIG stock on the open market. But, he also reported that this decision would not be made right away because his company will have to negotiate with several different government entities. Miller said there was a "strong possibility of significant profit to taxpayers for taking this journey with us."

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