Citigroup’s (NYSE:C) bailout has finally run its course nearly five years after the federal government agreed to rescue the troubled bank. The United States government is selling the last of the stake it received in return for the bailout funds in November of 2008. The bailout agreement between the two institutions marked a new phase in the government’s efforts to stabilize the banking industry.
After injecting close to $300 billion of capital into financial institutions, officials decided to shoulder bad assets as well. By the time Citigroup inked a deal with the federal government, Lehman Brothers had already filed for bankruptcy, Merrill Lynch had been sold to Bank of America (NYSE:BAC) after a staggering fourth quarter loss, heavy exposure to troubled mortgages had led Citigroup to post four quarters of consecutive losses, and the bank had already received $25 billion in taxpayer funded federal Troubled Asset Relief Program funds. That $25 billion Citigroup received as part of a broader banking-industry bailout was not enough to prevent the bank from becoming insolvent.
On November 23, 2008, a joint statement by the Department of the Treasury, the Federal Reserve and the Federal Deposit Insurance Corporation announced that the government would back approximately $306 billion in loans and securities and directly invest about $20 billion in the company. Under the asset guarantees, Citigroup absorbed the first $29 billion in pretax losses on the $306 billion asset pool, after which the government said it would cover 90 percent of the losses with the bank covering the rest. Citigroup received more financial assistance than any other U.S. bank during the crisis.