Jan. 27 (Bloomberg) -- Citigroup Inc., which has received $45 billion in U.S. rescue funds, reversed itself on a decision to buy a $50 million corporate jet after criticism from the government.

A Treasury Department official called Citigroup to express concern over the jet purchase, White House spokeswoman Jen Psaki said today. She declined to name the person. The lender has “no intent to take delivery of any new aircraft,” Citigroup spokesman Stephen Cohen said in an interview.

The bank said in an e-mailed statement to Bloomberg yesterday that it planned to buy new, fuel-efficient aircraft and sell older ones to lower operating costs. Citigroup said funds from the Troubled Asset Relief Program, or TARP, wouldn’t be used to buy the aircraft.

A dwindling capital cushion and sinking stock price forced Citigroup to take $45 billion of U.S. government rescue funds last year. Citigroup earlier this month said it will split in two under a plan to rebuild a capital base eroded by the credit crisis.

White House press secretary Robert Gibbs said yesterday at a press briefing that President Barack Obama “doesn’t believe” using private jets “is the best use of money.”

“He said that as it relates to the auto industry, and he believes that as it relates to banks, as well,” Gibbs said.

Citigroup planned to take delivery of a $50 million Dassault Falcon 7X corporate jet, the New York Post reported yesterday, citing a person familiar with the transaction. Citigroup is also seeking to sell two older Dassault 900EXs, worth about $27 million each, the newspaper said.

‘Unconscionable, Unacceptable’

“I’m glad they have changed their minds,” Michigan Democratic Senator Carl Levin, who yesterday criticized the aircraft expenditure, said on his Web site. “It is unconscionable and unacceptable for a corporation to purchase a fancy new custom jet to fly around their executives while the public is pouring billions of dollars of taxpayer money into the company, trying to keep it afloat.”

“We signed a contract in 2005 for replacement aircraft, which was part of our plan to reduce the number of aircraft Citi owns and use more fuel-efficient aircraft,” the bank said in the e-mail yesterday. “Refusing delivery now would result in millions of dollars in penalties.”

To contact the reporter on this story: Josh Fineman in New York at jfineman@bloomberg.net.

Last Updated: January 27, 2009 17:03 EST