Parsons says Citi can repay TARP

December 9, 2009

I’ve got a question below…but first the story: “Citi positioned to repay TARP, report” (Eder/Wilchins, Reuters) —

Citigroup Inc is in a position to repay TARP, the bank’s chairman, Dick Parsons, told cable television network CNBC on Wednesday.

Parsons told CNBC that Citigroup was in talks with regulators about repaying its $45 billion bailout from the U.S. Treasury’s Troubled Asset Relief Program….

Reuters reported on Monday that Citigroup and the U.S. government were disagreeing over how much the bank should raise to repay taxpayers, according to people briefed on the matter. The people said talks could take weeks or months.

Good that Treasury is pressing Citi to raise substantial equity to get out of the program. It should also sell its common shares back to the market…bank the paper gain taxpayers sitting on….

One question I’ve got: What about Citi’s “ring-fenced assets?” Remember the $306 billion loss-sharing deal that Citi signed with Treasury and FDIC? BofA almost got themselves involved in a similar deal, but it was never signed.

Presumably those ring-fenced assets are still on Citi’s balance sheet and are still backstopped. Should the company be allowed to exit TARP — allowing it to pay whatever bonuses it sees fit — if a large chunk of its most toxic assets are still backstopped by the government?

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