"U.S. Unloads Citi Stake for a $12 Billion Profit"

[Clio the Leo]

"U.S. Unloads Citi Stake for a $12 Billion Profit"
By RANDALL SMITH, AARON LUCCHETTI and MICHAEL R. CRITTENDEN

The U.S. Treasury sold the last of its Citigroup Inc. common shares in a $10.5 billion offering that capped the government's biggest bank bailout of the financial-market meltdown.

The stock sale, which was finalized Monday evening, means taxpayers will reap a profit of $12 billion on their $45 billion cash investment in Citi, the Treasury said. It also helps the government quell some of the criticism that it went too far in propping up the financial system, and allows the bank to shake the market stigma that it has effectively been a ward of the state.

"This is a milestone for the government and for Citigroup," said James Angel, a finance professor at Georgetown University. "It signals the company has been fully privatized and that their parole is over."

The Treasury, which a year ago set plans to exit the Citi investment within six to 12 months, had fallen behind that target as it executed plans to "dribble out" its 7.7 billion Citi shares, a 27% stake, in steady sales into the market. Through October, it had only sold 4.4 billion shares.

But the results of the November election, in which Democrats lost ground in the Senate and lost control of the House of Representatives, have been interpreted as a backlash against the kind of broad government involvement in the private-sector economy that became necessary during the meltdown.

Only three weeks ago, the Treasury also stepped on the gas pedal on its plan to exit its 61% stake in General Motors Corp., boosting the size of its sale of GM stock by 36% from as little as 303.1 million shares to 412.3 million shares. People close to the agency denied the election played a role in the timing of the share sale.

"By selling all the remaining Citigroup shares today, we had an opportunity to lock in substantial profits for the taxpayer and avoid future risk," Tim Massad, Treasury's Acting Assistant Secretary for Financial Stability, said in a statement. The sale also advanced the goal of "getting the government out of the business of owning stakes in private companies," he added.

http://online.wsj.com/article/SB10001424052748704156304576003884177348202.html

[FBaggins]

1. Does making money prove that it was the right decision to make?

People made buckets of cash in tech stocks in the late 90s. Does that profit demonstrate that they made sound investment decisions?

If you're out of work and spend your last $50 buying lottery tickets instead of feeding your kids... does your decision become less irresponsible if lightning strikes and you win?

And what about where the profits come from? Had Citi not been rescued, there surely would have been additional turmoil... but some of the banks would have survived (and even thrived). Those companies that didn't make all of the terrible decisions would have picked up business/customers from the corpse of Citi. Five years later they would have been far more profitable than they might now expect to be (and thus their stock prices would be higher).

This means that the government "profit" not only results from saving a company that arguably should have been allowed to fail... but indirectly steals the profits from the people who invested wisely in the companies that didn't get involved in the kinds of business that caused the collapse.

[Nicholas D Wolfwood]

6. Except this isn't buying lottery tickets.

It was a calculated decision, and it's clear that it was a the right one. Get over it.

[FBaggins]

8. No... it's worse.

Buying lottery tickets isn't smart... but it also isn't immoral.

Stealing from companies that behave the way we want to encourage (and their investors) to bail out the ones that not only behaved irrationally but almost took down the entire economy with them, it a morally questionable (at best) decision.

it's clear that it was a the right one

That is by no means clear.

[Nicholas D Wolfwood]

9. You're weeping for corporations now?

You have an awful lot of moral flexibility, I'll give you that one. If only you had intelligence to match.

If you were falling out of an airplane, would you refuse to take a parachute from the pilot because he's responsible for putting you in danger? Or would you take the parachute, live to see another day, and deal with the irresponsible pilot tomorrow?

Well, we took the latter option, and there's nothing even remotely resembling immoral about it. These actions averted a depression. It's an assertion backed by damn near every economist with a college degree.

[FBaggins]

10. Lol... says the guy who is cheering the bailout of one of the biggest?

How could I be "weeping" for corporations when I'm saying that we should not have rescued Citi in this fashion?

If you were falling out of an airplane, would you refuse to take a parachute from the pilot because he's responsible for putting you in danger?

Of course not... but that's not what we're talking about. You're taking the parachute from the co-pilot who remembered to bring his own so that you can save the pilot who sold his for the one-quarter profit boost... all on the premise that you should be the one who decides who lives and who dies.

[Nicholas D Wolfwood]

11. Read your own posts and figure it out.

Because honestly, they're too painfully stupid for me to read again. :banghead:

[FBaggins]

12. "painfully stupid" more accuately describes...

...your notion that if you steal $10 from my pocket... the fact that you show a $5 profit on your next quarterly report is proof that it was a good idea. :rofl:

[Nicholas D Wolfwood]

13. Who did we "steal" from, by the way?

Do you consider your tax money to be theft? Grover Norquist would love to have you as an ally.

[FBaggins]

14. So you're admitting that you didn't read the posts the first time.

Why then should I repeat them?

Not every company made the kinds of reckless decisions that drove us to the edge of disaster (making profits they didn't deserve in the process). Those socially responsible financial firms (credit unions, small banks, a handful of the mid-tier regionals, etc) would have all gained clientele from the likes of Citi and her cousins. Instead of letting the morally (and literally) bankrupt pay the price for their stupidity while the responsible companies profit from it... we did the opposite.

Do you consider your tax money to be theft?

Of course not (though your desperate need to build a strawman is noted). But we do deserve to have our tax dollars managed more responsibly. Taking a flier on a company that has essentially been bailed out three times is at the least unwise.

Grover Norquist would love to have you as an ally.

Lol... Norquist was a big fan of proposals to invest Social Security funds into private companies. Accepting increased risk in exchange for a shot at greater returns. Progressives opposed such moves on the grounds that the level of risk was not appropriate for those funds.

Now we have you cheerleading far FAR riskier ventures while simultaneously associating others with Norquist? How ironic. :rofl:

[Pisces]

2. This is good news. It should be highlighted that what some thought was bad

policy actually saved jobs, and made a profit.

[Phx_Dem]

3. +1

[Clio the Leo]

4. But you will hardly hear it mentioned on the news.

Shame.

[eppur_se_muova]

5. We'll hear it in the SOTU address. nt

[Nicholas D Wolfwood]

7. Do people pay attention to that?

I'm not sure they do.