Citigroup to U.S. government: Please leave

The big bank seeks a negotiated withdrawal of Treasury investment. But whatever happened to those toxic assets?

Published September 15, 2009 2:11PM (EDT)

Citigroup wants the U.S. government out. The The Wall Street Journal expresses it most poetically: "Eager to shed the stigma of being a ward of the state," Citigroup is exploring ways to get the U.S. Treasury to reduce its 34 percent stake in the financial institution.

Bloomberg says the Treasury is considering a number of options, including regular sales of stocks "daily or weekly" or a more complicated plan in which Citigroup makes a public offering, and uses the proceeds to buy out the government's share.

Every news outlet covering the story this morning points out that if the U.S. were to unload its shares today, it could make a pretty profit on its investment. The conversion of the government's preferred shared into common stock took place at $3.25 a share. At the end of trading Monday, Citigroup was at $4.52. Multiplied against the government's 7.69 billion shares and we, the taxpayers, would clear ten billion.

Yay for us. However -- I'm still wondering what ever happened to all those toxic mortgage-backed securities that were threatening the stability of the global financial system. What happens if the U.S. sells its stake, but the nascent economic recovery that we are struggling so hard to see dies stillborn, the recession double-dips, and Citigroup's market capitalization crashes again? Do we roar back in?

I'm a little less worried about the loss of leverage that selling off the 34 percent stake implies for the government, since the Treasury never seemed inclined to use its leverage in any meaningful way. Yesterday, President Obama asked Wall Street to do the right thing even before new "rules of the road" were passed. One would think that as the owner of more than a third of Wall Street's biggest financial institution, we could do more than ask.

By Andrew Leonard

Andrew Leonard is a staff writer at Salon. On Twitter, @koxinga21.

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