Finance Resources
Investment Planning
Stock Market
Futures & Options
Mutual Funds

Home » Finance Articles » Banking Articles » Citigroup Wants Taxpayers Out of Its Hair Articles

Citigroup Wants Taxpayers Out of Its Hair

Good news! Citigroup (NYSE: C) -- now 34% owned by taxpayers -- is developing a plan to rid itself of its ward-of-the-state status.

Citi is devising a plan to raise $5 billion by selling common stock, likely to repay a portion of the preferred shares still owned by the U.S. Treasury. It's also planning to ask the Treasury to simultaneously sell a chunk of its 7.7 billion common shares back to private markets.

This is great news for taxpayers waiting for last year's bank bailouts to be repaid. But it means very little, if anything, for current Citigroup shareholders.

After several injections, taxpayers pumped $52 billion into Citigroup. Just recently, $25 billion of that was converted into common stock, leaving another $27 billion or so left as preferred stock. Even if Citigroup uses all $5 billion raised from common-stock sales to repurchase preferred stock, taxpayers would still hold a $22 billion preferred stake. That's no small sum for a company still trying to figure out how to earn a profit.

And the Treasury selling common stock back to private markets may be encouraging from a confidence point of view, but it does nothing to Citi's balance sheet. Ownership would transfer from taxpayers to private investors, but the real damage -- the 75% dilution that came with issuing the common stock -- remains in place. And from a technical view, the downward pressure that would come with selling a few billion shares into private markets could kill the enthusiasm that's pushed shares unjustifiably higher this summer -- the same enthusiasm that's no doubt being used as evidence the bank is healthy enough to go at it alone.

We can't blame Citigroup for wanting to tell Uncle Sam to beat it. As rivals Goldman Sachs (NYSE: GS) and JPMorgan Chase (NYSE: JPM) return to life as normal, market-owned banks, the stigma of being attached to taxpayers absolutely has its downsides. Same goes for Bank of America (NYSE: BAC). Citi and Bank of America (NYSE: BAC) are both realizing this.

But most of the damage that came from relying on government funds is already done, and largely irreversible. The biggest change that might come with shedding government ownership might be the relaxation of executive pay restrictions. From a shareholder point of view, that's hardly a victory to cheer for.

More Banking Articles
put comment
Domain Registration | Windows Hosting | Linux Hosting | Java Hosting | Virtual Dedicated Server | Dedicated Server | Reseller Web Hosting | Unlimited Windows reseller hosting | Unlimited Linux reseller hosting | Cheap Windows reseller hosting | Cheap Linux reseller hosting | Cheap Windows hosting | Best Windows hosting | Windows hosting Multiple Domains | Unlimited Windows hosting | Compare hosting plans | Cheap Linux hosting | Best Linux hosting | Linux hosting Multiple Domains | Unlimited Linux hosting | Cheap asp.net hosting | Best asp.net hosting | unlimited asp.net hosting | Cheap asp.net reseller hosting | Unlimited asp.net reseller hosting | Java Features | Cheap Java hosting | Best Java hosting | unlimited Java Hosting | Unlimited Linux reseller hosting | Java Hosting Multiple Domains| | Matargashti Full Song | Matargashti mp3 Download | Matargashti Video Download | Matargashti Song Tamasha | Prem Ratan Dhan Payo Songs Download | Prem Ratan Dhan Payo Songs mp3 Download | Prem Ratan Dhan Payo Songs Video Download | Pinga Song Download | Pinga Full Song mp3 Download | Pinga Song mp3 Download | Pinga Song Video Download | Latest Bollywood Updates | Bollywood Updates | Prem Ratan Dhan Paayo Songs Download|
© ProfitGuruOnline-2024. All Rights Reserved.