The Treasury Department, under advisement of Morgan Stanley, will sell up to 1.5 billion shares of stock in banking giant Citigroup. Currently, the federal government owns roughly 7.7 billion shares of Citi stock, which is worth approximately $4.70 a share. By selling 1.5 billion shares, the government will likely produce a lofty profit of more than $2 billion.
The U.S. government obtained a controlling interest of the mortgage conglomerate when $45 billion in bailout funds were made available in 2008 through the Obama administration’s Troubled Asset Relief Program (TARP). Citi has since repaid $20 billion to the government, while the Treasury Department converted the remaining $25 billion in preferred shares into 7.7 billion common shares, netting a taxpayer profit of approximately $30.5 billion.
The move by the Treasury Department is the latest effort to reduce the federal government’s support of the major banking institutions that received taxpayer bailouts as a result of the recession and the housing crisis.
Although the Treasury Department did not disclose when the stock sales would begin, it did indicate it would proceed “in an orderly fashion under a prearranged trading plan with Morgan Stanley …” Morgan Stanley is expected to be granted the authorization to sell additional Citi shares once the initial1.5 billion shares have been sold.
Other banks to receive TARP funds, including Wells Fargo, JP Morgan Chase and Bank of America, have already paid back their funds to the Treasury Department. In an interview with CNN television on Sunday, Treasury Secretary Tim Geithner said, “We’re putting TARP out of its misery.”
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