December 14, 2009
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News: Citibank Prepares to Repay Taxpayers
Citibank, the nation's third largest credit card company is close to making a deal that would end its connection with the government and taxpayer's bailout program. Citibank representatives spent most of Sunday evening trying to convince government officials that the bank is stable enough to stand on its own. If Citibank is allowed to repay the $45 billion in funds the giant credit card company received from taxpayers, the bank will remove itself from the scrutiny of the government. The bank is hoping to make an announcement today that a deal has been finalized. The company plans to sell $18 billion in stock to repay the debt. The government continues to have some concerns that the major credit card company may not be ready to stand on its own. Whether or not the bank has the ability to weather another economic crisis remains to be seen.
If Citibank is given the go ahead, the bank would recoup over $20 billion of preferred stock that the government acquired in the bailout program. A $250 billion Federal insurance policy on the bank's distressed real estate and weak credit card assets will also be terminated making Citibank liable for the losses. The Treasury is just as anxious to end its relationship with the credit card company as it plans to sell over 7 billion shares through a series of large stock sales. Citibank executives say the payback will greatly benefit the bank and would extinguish rumors that some of the company's top executive might join other rival companies. The bank's stockholders are not as optimistic as Citibank's Chief Executive Vikram S. Pandit. Apprehension from investors forced the company's stocks down by 3 percent last week.
Citibank has been struggling over the past two years as profits have sharply declined and credit card and mortgage defaults have escalated. Experts do not expect the bank to begin showing any substantial profit until late 2010 or early 2011. The news about Citibank's efforts to negotiate a deal with government officials just a few days after Bank of America announced its intentions to repay taxpayers.