Treasury to sell Citigroup securities from Asset Guarantee Program

The Treasury Department announced it will sell the trust preferred securities in Citigroup Inc. that it obtained from the company's participation in the Asset Guarantee Program.

Treasury obtained the securities as a result of agreeing to share losses from a pool of $301 billion in assets held by Citigroup. The company issued the securities to Treasury as well as the Federal Deposit Insurance Corp., in exchange for what essentially amounted to insurance.

The agreement was terminated in December, and Treasury kept $2.2 billion of Citigroup's premium. The securities can be reedmed on or after Oct. 30, 2015, according to a recent prospectus. Each security has a liquidation amount of $25 and entitles the holder to quarterly dividends as well. (You can view the full prospectus here.)

FDIC holds a separate $800 million in securities that are not yet up for sale.

Treasury never had to make any payments to Citigroup under the deal, so the sale of the securities will produce a net profit for taxpayers.

Citigroup received $25 billion in Treasury's first wave of Capital Purchase Program investments in October 2008. Less than two months later, it got a controversial second bailout of $20 billion through another TARP vehicle, the Targeted Investment Program.

In December 2009, Citigroup repaid all $20 billion of its TIP money. As for the remaining $25 billion, Treasury converted the Citigroup preferred stock it received for that money into 7.7 billion shares of common stock, giving the government a 27 percent ownership stake in the company.

In May, Treasury sold a portion of the shares for $6.2 billion, and in June another sale yielded $4.3 billion. More sales are expected to continue in coming months.

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