A day after Dick Parsons promised some unspecified plan to get Citi (C) out from under TARP, the Wall Street Journal reports that the megazombie is planning some kind of joint stock sale, along with Treasury, to raise capital and slim the government’s holdings.
WSJ: Citigroup hasn’t held in-depth talks with the government. Over the weekend, Citigroup called a Treasury official and said the company wanted to start talking about paring down the Treasury investment, according to people familiar with the matter. On the call, Citigroup officials said they planned to raise outside capital in order to repay the outstanding bailout funds. Treasury officials responded to Citi that they didn’t object to the company paying back Washington as long as Citi first raised offsetting capital, these people said.
It’s no surprise that Citi would want to pay the money back ASAP, seeing as it’s openly bristled at TARP pay restrictions, and since most of its major competitors (excluding BofA and Wells Fargo) have already left the program.
That being said, it will be regrettable if Citi does manage to get out of the program without having gone through a meaningful change in its structure. The problem with Citi is not just that it had a horrible balance sheet. It’s also badly structured and seemingly unable to execute good risk management. The bank has nearly collapsed during based crises, and if there’s another one, it’ll probably be on the front lines of that.