In the wake of BofA's repayment of its bailout assistance, Citigroup is trying to avoid being the only large U.S. bank left on "exceptional assistance"
By Bradley Keoun
(Bloomberg) — Citigroup Inc. Chief Executive Officer Vikram Pandit is pressing the U.S. Treasury Department and regulators to agree as soon as this week on a plan to pay back $20 billion remaining from a government bailout, people familiar with the matter said.
Pandit, 52, wants an agreement in place this week or next, the people said, speaking on condition of anonymity because the discussions are private. He accelerated efforts after last week's announcement by Bank of America Corp. (BAC) that it had won approval to pay back $45 billion of taxpayer funds and exit the Troubled Asset Relief Program, they said.
Citigroup is trying to avoid being the only large U.S. bank left on "exceptional assistance," a Treasury designation reserved for companies including American International Group Inc. (AIG) and General Motors Co. that are surviving on taxpayer aid. Such companies are subject to government-imposed pay limits that may make Citigroup vulnerable to employee-poaching by unfettered Wall Street rivals.
"We do not comment on individual institutions but it's fair to say that since Bank of America announced its intention to repay the government, others are pursuing discussions to understand what needs to be done to move ahead with repayment," Treasury spokesman Andrew Williams said. "We continue to believe that banks and our financial system are better off with private capital instead of government capital." Jon Diat, a spokesman for New York-based Citigroup (C), declined to comment.
'As Soon as Possible'
In October, Pandit said he was "focused on repaying TARP as soon as possible." He said, "We're going to do so in consultation with the government and our regulators."
Citigroup, which took $45 billion of TARP funds last year, in September converted about $25 billion of that into common stock, equivalent to a 34 percent stake. The Treasury Department, which is free to sell the stock at any time, is holding off on a sale until a plan can be reached with regulators for a payback of all remaining obligations from the bailout, a person close to the Treasury said last week.
Citigroup still has $20 billion in bailout funds along with guarantees from the Treasury, FDIC and Federal Reserve on $301 billion of devalued securities, mortgages, auto loans, commercial real estate and other assets. Citigroup paid $7 billion in advance for the guarantees, which last five to 10 years, depending on the type of underlying assets.
The lender's exit plan may be more complicated than Bank of America's because the government must decide how to handle the Treasury's common stake and what to do about the asset guarantees, the person close to the department said.
The bank's regulators, which include the Federal Reserve, Office of the Comptroller of the Currency and the Federal Deposit Insurance Corp., haven't commented on when the bank might be allowed to exit.
The government is trying to wind down bailout programs extended as financial markets convulsed late last year. Treasury Secretary Timothy Geithner said in a Dec. 4 interview that most taxpayer money injected into banks through the Troubled Asset Relief Program will eventually be recovered.
JPMorgan Chase & Co. (JPM), Goldman Sachs Group Inc. (GS) and Morgan Stanley (MS), all based in New York, repaid bailout funds in June. San Francisco-based Wells Fargo & Co., with $25 billion of TARP money, isn't subject to pay limits because it never needed a second helping of bailout funds.
Citigroup's talks with regulators likely will center on the amount of capital the bank must raise to assure it can weather expected loan losses, the people familiar with the matter said.