FORTUNE -- Congratulations, taxpayers. Your Citigroup bailout is finally over.
On Monday, the Federal Deposit Insurance Corp. said it was selling $2.4 billion in Citi bonds. The bank debt is the last remaining piece of Citi (C) that is owned by any government agency tied to the bailout of the firm in the wake of the financial crisis five years ago. The FDIC got the bonds in return for insurance it provided Citi in late 2008 against losses on $301 billion worth of toxic investments.
Citi wanted the government backstop because investors were concerned the bank wouldn't have enough money to cover its mortgage-related losses at the height of the financial crisis. But despite taking out the insurance, Citi never actually asked the government to cover any losses on the portfolio. So the debt sale is pure profit for the FDIC.
The Citi bailout has long been considered a success. The government surely made money on it.
The government has already netted about $13 billion on the Citi bailout. It put $45 billion into the troubled bank at the height of the financial crisis in exchange for preferred and common Citigroup stock. The government got about $57 billion for that stake, selling the last of it in mid-2011. On top of that, earlier this year, the Treasury Department received nearly $900 million for the insurance it provided Citi on its troubled portfolio. The current sale would bring the government's overall profit on the Citi bailout to nearly $15.5 billion.
But the question is whether profit is the best gauge of a bailout's success.
In early 2009, when the bailout didn't seem to be working out, Obama officials considered fully taking over Citi and other troubled banks, nationalizing them. That reportedly was the approach Larry Summers, who now appears to be Obama's top choice to take over the top job at the Fed, favored.
The argument against nationalization was: One, that it would be a long time, if ever, before the government could get out. Two, the U.S. would lose a lot of money. And three, investors would rush from other banks, fearing further nationalizations, and the system would collapse anyway.
The system, of course, didn't collapse. So if that is the measure, bailouts win. But Citi's bailout still took five years. And Citi has wallowed for much of the past five years as the nation's most troubled large bank. It lends a quarter less than it did before it was bailed out.
Nationalization is essentially what we did with Fannie Mae and Freddie Mac, and amazingly those two firms look close to returning all the money the government gave them as well. What's more, Fannie and Freddie were instrumental in the recent housing turnaround, given that the two government-backed firms guarantee nearly all new mortgages these days.
The main concern about the bailout was that it would produce so-called zombie banks -- banks that were still around but continuously shrinking. Five years later, they appear to be better off than undead. Citi has recently has been showing signs of a turnaround. But lending has only started to rebound in the past year or so. And nearly all of the uptick has been in business lending. Many consumers are still having a hard time getting new loans. And you could argue that less lending in the wake of the U.S. huge credit-fueled housing bubble makes sense. But bank lending as a percentage of deposits is near an all-time low. So that might not be the best outcome either. The lack of lending could be one reason the recovery has been slow.
The other concern was that after receiving bailouts, banks would take on more risks knowing that the government would be there to bail them out. And indeed, there are some signs that banks are again dabbling in risky financial products, though probably not nearly as risky as subprime mortgage CDOs, at least not yet.
But hey, we didn't lose money on Citi, and we are out. Happy fifth financial crisis anniversary everyone.
Turns out that TARP funds weren't meant to finance luxury vacation homes.
FORTUNE -- No matter how one might feel about the 2009 bank bailouts, there is one thing I think we can all agree on: Bank executives shouldn't have used TARP money to buy themselves luxury vacation condos.
But that's exactly what Missouri banker Darryl Layne Woods has admitted to having done.
Woods today plead guilty in federal court to having lied to MOREDan Primack - Aug 27, 2013 3:53 PM ET
Here's one instance where you should give the Treasury an "F" for effort.
Correction: 5/24 12:57
FORTUNE -- A few weeks ago the Treasury Department put out its latest report of what the government's rescue efforts in the wake of the financial crisis cost taxpayers. The conclusion: Nada. In fact, the Treasury says that if you take a broad view of all the bailout programs, taxpayers actually are looking at a $9 MOREStephen Gandel, senior editor - May 21, 2012 1:59 PM ET
What's ailing us? It's not just unemployment. It's not just Europe's debt woes. And, no, it's not Wall Street this time. It's the takeover of the economic debate by fanatics who are up to no good. Fix that -- and maybe you fix the economy.
FORTUNE -- What the hell is going on?
Standard & Poor's, the bond-rating agency, downgrades the U.S., and the world trembles. The markets here go nuts on MOREAllan Sloan, senior editor-at-large - Aug 18, 2011 5:00 AM ET
An outside critique of our analysis: "Surprise! The big bad bailout is paying off"
By Bob Eisenbeis, Cumberland Advisors
A recent column by Allan Sloan and Doris Burke in the Washington Post claims that the distasteful financial bailout not only worked but also generated a profit for the government of at least $40 billion and perhaps as much as $100 billion. Their conclusion is based on their working of the numbers, and the MOREJul 19, 2011 5:00 AM ET
Our recent analysis of the U.S. bailout caused quite a ruckus. Here is our response to the critics who say we omitted some key details.
FORTUNE -- When we wrote our story about the financial-system bailout turning a profit for taxpayers, my Fortune colleague Doris Burke and I (and our editors) decided that less was more. So we showed you our bailout numbers, but didn't give you much detail about how MOREAllan Sloan, senior editor-at-large - Jul 19, 2011 5:00 AM ET
Investors are in panic mode over the debt crisis in parts of Europe, and they're demanding swift, sweeping action by European financial leaders to reverse its Lehman moment. Eurobonds, anyone?
By Cyrus Sanati, contributor
FORTUNE -- Investors are pushing the panic button as the European debt crisis spins out of control. Banks around the world are trying to calm their clients' fears, setting up special conference calls and one-on-one sessions, but there MOREJul 15, 2011 8:45 AM ET
The U.S. government's often maligned $14 trillion intervention not only staved off global collapse - but is making money.
With Doris Burke
FORTUNE -- The bailout of the financial system is roughly as popular as Wall Street bonuses, the federal budget deficit, or LeBron James in a Cleveland sports bar. You hear over and over that the bailout was a disaster, it cost taxpayers a fortune, we didn't really need it, it MOREAllan Sloan, senior editor-at-large - Jul 8, 2011 5:00 AM ET
Until last week, Neil Barofsky was the special investigator of the TARP program, where he says his main job duty was blunting the effects of the Treasury's bad decisions.
FORTUNE -- Neil Barofsky has been chasing bad guys for much of his professional career. Whether it was as an assistant US Attorney in the Southern District of New York or in his most recent gig as the man trying to make MOREDuff McDonald, Contributing Editor - Apr 5, 2011 9:40 AM ET
The TARP deadbeat list continues to grow.
The number of banks missing scheduled quarterly dividend payments to the government hit 142 last month, according to the latest Treasury report on the subject. That's up from 123 in November, 115 in August and 91 in May, SNL Financial said.
The delinquent banks have $3.7 billion of government loans outstanding, SNL said. The list of the late banks is available from Treasury here, starting MOREColin Barr - Mar 16, 2011 12:03 PM ET
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