Treasury Authorizes Sale of More Citigroup Stock

Earlier today it was reported that the federal government would begin a fourth round of sales of Citigroup stock. The move is part of the fed's ongoing effort to recoup costs from the financial bailouts.

ABC News reports:

The Treasury Department said Tuesday it had given Morgan Stanley, its agent for the sales, authorization to sell an additional 1.5 billion shares of Citigroup stock beginning immediately.

Citigroup received $45 billion in taxpayer support in one of the largest bank rescues by the government. The government also provided the bank with insurance against losses on a pool of $301 billion in assets.

Of the $45 billion in taxpayer support provided to Citigroup, $25 billion was converted to a government ownership stake that the Treasury has been selling off since last spring. The bank repaid the other $20 billion in December 2009.

The announcement of the new stock sales came a day after Citigroup announced that it had posted its third straight quarterly profit.

The bank, which is still 12 percent owned by the government, earned $2.15 billion, or 7 cents per share, in the three months ending in September.

Read more here

Bank Makes Rewards Harder to Earn With Card Changes

Although credit card companies try to promote their reward programs as valuable benefits to their customers, new reports suggest they less benefits to consumers then you would think. Earlier today WalletPop.com put together a consumer warning post about CitiGroup and how they are making it difficult for their customers to take advantage of their so called “rewards” program. Check out a section of their article below.

We've written recently about some tricky things credit card companies do that can whittle away at the value of your hard-earned rewards, and recent news reported in the Consumer Reports blog illustrates that banks are still trying -- and trying very hard, in some cases -- to keep you from getting those perks.

Consumer Reports says that Citigroup recently switched most holders of its Dividend Platinum Select MasterCard over to its Citi Dividend World MasterCard. One major difference between the two cards is that the Platinum Select offered 2% cash back in several commonly used retail categories like supermarkets, gas stations and drugstores. The World has a different rewards structure that puts the onus on the customer to keep earning their rewards.

With the World rewards program, users can earn 5% cash back on hotels and rental cars. This blog post says most of the new rewards are travel related, which is in line with the new card's enhanced benefits of trip insurance, lost-baggage reimbursement and the like. But if you got the card hoping to earn a nice cash-back bonus at the grocery store, you're out of luck. But there's an even bigger caveat: The reward categories change every quarter, some have lower redemption rates (in line with the old 2% rate) and - here's the kicker - customers have to remember to sign up for them every three months. No sign-up, no rewards.

Linda Sherry, director of national priorities for advocacy group Consumer Action, blasts the practice. "The idea of having to contact the company at quarterly intervals to continue your rewards is inconvenient and seems designed to avoid paying rewards," she told WalletPop via e-mail. What's more, she added, there's nothing in the CARD Act that prevents card issuers from pulling these kinds of switcharoos after you've already gotten established with your card. "This is precisely the reason we believe restrictions on one-sided contractual agreements is so important," Sherry said. "The current practice leaves consumers as sitting ducks."

Perhaps even more frustrating to the changes in the reward program is the fact that Citi issued new card numbers for every customer. In other words, if you had the old card and had any auto-bills or recurring payments set up, you'll have to tell all of those

Continue reading at WalletPop.com…

Your Card Has Been Declined, Just as You Wanted

If you are one of those people who just cannot seem to stay within your monthly budget, you might want to look into the new personal finance tools Citigroup plans to begin offering customers. They intend to offer a feature that will allow customers to set budgets for themselves, and have their card decline purchases that would put them over budget.

The service, called inControl and already in use by some Barclaycard holders in Britain, is a sort of financial chastity belt that offers the potential to prevent a variety of budget sins and other money traps.

Worried about your restaurant habit? If your bank adopts MasterCard’s service, you could tell it to have your debit or credit card reject any restaurant purchase above whatever monthly cap you set.

Sick of your credit card number falling into the hands of thieves? Tell your card issuer to never allow charges originating from the fraud-prone countries that end in “stan” or “ia.” (Don’t worry: You can instruct your bank to make an exception for Australia during the few weeks that you’ll be honeymooning in Sydney.)

Continue reading at NY Times.com…

Citigroup Q4 Loss Narrows, Loans Seem to Stabilize

From WashingtonPost.com:

Citigroup Inc. posted a $7.6 billion quarterly loss on costs related to repayment of U.S. bailout funds and still-high loan losses, but the bank's shares edged higher as some investors saw glimmers of hope. In a sign of stabilization, losses on consumer and corporate loans fell compared with the third quarter.

"They've crept out of the abyss like everyone else," said Henry Asher, president at Northstar Group, whose clients own Citi shares.

"They have a long way to go before they start reporting significant profits," Asher added.

The government still has a bigger stake in Citigroup than in any other major U.S. bank, reflecting the swamp of toxic assets that threatened Citi's survival. Chief Executive Vikram Pandit told investors that U.S. consumer credit remained an issue for the bank, although he said some credit fundamentals appeared to be stabilizing, especially internationally.

The third-largest U.S. bank said its quarterly loss amounted to 33 cents a share, compared with a loss of $17.3 billion, or $3.40 a share, a year earlier. The loss matched analysts' average estimate, according to Thomson Reuters I/B/E/S. Citigroup shares rose 7 cents, or 2 percent, to $3.49 in midday trading.

"It's not an impressive quarter in my view," said Matt McCormick, portfolio manager and banking analyst at Bahl & Gaynor Investment Counsel. Investors are still worried about further credit losses ahead, as well as the impact of sweeping changes to banking regulation, McCormick said.

U.S. Gave Up Billions in Tax Money in Deal for Citigroup's Bailout Repayment

Taxpayers everywhere are fuming over the news that the recently bailed-out financial giant Citigroup is being granted permission to withhold billions of dollars in potential tax payments to the IRS. Usually when the government takes partial ownership of a company through a federal bail-out they are forced to give up many of the tax breaks they were used to receiving. However, in this case Citigroup is being allowed to take advantage of these breaks with the hope that it will outweigh the expected losses when the government begins selling their shares of the company to private investors.

While the Obama administration has said taxpayers are likely to profit from the sale of the Citigroup shares, accounting experts said the lost tax revenue could easily outstrip those profits.

The IRS, an arm of the Treasury Department, has changed a number of rules during the financial crisis to reduce the tax burden on financial firms. The rule changed Friday also was altered last fall by the Bush administration to encourage mergers, letting Wells Fargo cut billions of dollars from its tax bill by buying the ailing Wachovia.

"The government is consciously forfeiting future tax revenues. It's another form of assistance, maybe not as obvious as direct assistance but certainly another form," said Robert Willens, an expert on tax accounting who runs a firm of the same name. "I've been doing taxes for almost 40 years, and I've never seen anything like this, where the IRS and Treasury acted unilaterally on so many fronts."

Continue reading at Washington Post.com…

Bank Of America May Need More Money

Just days after I posted an entry on the 10 biggest recipients of Federal bailout money, Bank of America announced they may need more help from the government, according to the Associated Press. You can find a snippet of their story below, but the full article can be found here.

Bank of America Corp. (BAC) (BAC) and Citigroup Inc. (C) (C), which have each received $45 billion in government bailout funds, have been told by regulators that "stress test" results show they may need to raise additional capital, The Wall Street Journal said Tuesday.

Charlotte, N.C.-based Bank of America is looking at a shortfall in the billions of dollars, the paper said, citing people familiar with the situation. Both banks plan to rebut the preliminary findings, according to the paper, with Bank of America expected to respond Tuesday ahead of its shareholder meeting Wednesday.

Citigroup declined to comment; Bank of America officials weren't immediately available to comment.

As executives of the nation's largest banks review their stress-test results, even the top performers are lobbying regulators to raise their scores before the numbers are finalized Friday.

Fed officials told reporters Friday that all 19 banks that took its "stress tests" will be required to keep an extra buffer of capital reserves beyond what is required now in case losses continue to mount. That would mean some banks will likely have to raise additional cash. But the Fed stressed in a statement that a bank's need for more capital reserves to meet the requirements should not be considered a measure of the "current solvency or viability of the firm."

Federal Reserve officials held top-secret meetings with bank executives last week to give them preliminary findings of how each bank would fare if the recession got much worse. The government plans to announce the results of the tests May 4, and banks will have the opportunity to appeal the findings.

By law, the banks cannot publicize the results without the government's permission.

Executives sifted through the test results over the weekend, devising arguments they hope will persuade regulators to boost their scores, according to two industry officials who requested anonymity because regulators have barred them from discussing the process.

Banks have until Tuesday to make their cases. They will receive the final test results Friday, and the information will be released next week.

The results will determine the fates of the companies, which together hold one-half of the U.S. banking system's loans. Banks found to need more capital face several possibilities: The government could convert its stake in them to common shares, force them to raise money from investors or eventually release more funds from the Treasury Department's $700 billion financial bailout.

For Treasury, the easiest way to bolster bank balance sheets is to convert the government's existing stake from preferred shares - a form of debt - into common shares that carry voting rights. This would help Treasury avoid returning to Congress for more bailout money - a request lawmakers are likely to rebuff.

The banks' options are designed to ensure banks have enough cash to withstand the mounting loan losses they would absorb in a bleaker economy.

If the test showed a bank would need more money to endure a much worse recession, regulators will force it to meet higher standards for capital reserves, to offset possible future losses.