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List: Posted: 08/12/11
The government bailouts of banks and major corporations in recent years have not always gone according to the government's master plan. However, the deal with Citigroup certainly seems set to earn the federal government a tidy sum, to the tune of $12 billion. How does this work and what is the money from? The money comes from the sale of Citigroup stock, 2.4 billion shares of it, to be precise.
During the bailout of Citigroup, the government supplied a significant amount of funds, and was rewarded with shares of stock in the company. Now that Citigroup stock has risen, to about $4.35 per share, the government is going to sell and earn a massive profit from doing so.
This single transaction will give the government a total of $57 billion in its deal with Citigroup. This helps to recover funds lent out through the TARP program, as well as helps to get the government out of owning companies, as well. For Citigroup, the government sale and pullout is a good sign. It means that Citigroup is once again fully privatized, and that the government feels they are stable enough to be economically viable without further TARP assistance or other government funding.
The sale of Citigroup stock follows a similar sale of stock in GM, though the government only reduced their holdings in the automaker, and did not totally divest itself from the company. Currently, the cost of the TARP program to the US taxpayers is estimated to be about $25 billion, down from $66 billion.
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