Kind of a messy situation the other day when Citigroup tried to exit TARP to get out of compensation restrictions. It had to raise $20 billion in a stock offering on Wednesday. To maintain its cover as a non-zombie bank, it convinced the Treasury to sell $5 billion of its 25% ownership of Citigroup at the same time. But guess what? No one wanted to pay what the Treasury originally paid, $3.25 a share. Either the investors know something we don't or all the players are gaming the system.
Thank God Citigroup Vice Chairman Ned Kelly was on the case Monday evening, two days before the offering. He was irate that the government allowed Wells Fargo to launch a stock sale at the same time. So he called a Treasury aide (who?) to complain about the timing.
Then finger pointing began. The Fed and the FDIC weren't too sure the TARP banks were strong enough to exit. There is no mark-to-market valuation, only fair value, if that. No one really knows how strong these banks are or if they'll need mass transfusions of more government aid in the very near future:
[The Fed and the FDIC] privately complained that Treasury officials pushed them to allow banks to quickly leave TARP.
On Thursday, after the government pulled back its stock offering, the Treasury came back at the Fed/FDIC with a quick retort:
[D]ecisions about bank repayments are up to bank regulators at the Fed and FDIC.
So the Treasury blames the Fed and the FDIC. If what the Treasury says is true, why is Ned Kelly calling Geithner? Shouldn't he be calling Bernarke or Bair? If I were cynical, I'd say Geithner is more loyal to Ned Kelly than Sheila Bair, FDIC Chairman.
I can rest easy knowing the taxpayers' money is being safeguarded by the Vice Chairman of Citigroup. Otherwise we might be in real trouble.