The U.S. government has padded its return on aid to Citigroup (NYSE:C) during the financial crisis.
The Treasury Department said Tuesday it expects to receive $894 million from the sale of debt that Citi issued in exchange for an infusion of funds under the Asset Guarantee Program. The Treasury, Federal Reserve and the Federal Deposit Insurance Corp. jointly offered that emergency assistance.
The sale, which will end Treasury's ownership of securities in Citigroup, would bring to $13.4 billion the return on $45 billion disbursed to the company under the Troubled Asset Relief Program.
A series of complex transactions over several years culminated in Tuesday's announcement.
The government agreed in early 2009 to share potential losses on a $301 billion pool of loans held by Citigroup. In return for the aid, both the Treasury and the FDIC received preferred stock that was later converted to trust preferred securities.
Citigroup ended the loss-sharing agreement in late 2009 without the government's incurring any loss. As part of the termination, the FDIC agreed to transfer $800 million worth of its Citigroup trust preferred securities to the Treasury upon maturity of debt issued by Citigroup in return for other aid — the company's participation in the FDIC's Temporary Liquidity Guarantee Program.
Two months ago, after the TLGP-related debt had matured, the FDIC transferred the securities to the Treasury, which on Monday returned them to Citigroup in exchange for $894 million worth of subordinated notes that Treasury will sell to investors.
"Today's transaction is part of our continuing efforts to wind down TARP's bank investment programs, which helped stabilize our economy during a severe financial panic and delivered a profit for taxpayers," Tim Massad, assistant secretary for financial stability, said in a press release.