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Citigroup Releases First Quarterly Report on TARP Funds

Citigroup released a fourth-quarter 2008 report today outlining how it has used much of the $45 billion bailout they've received from the U.S. Treasury under the Troubled Asset Relief Program (TARP).

Citigroup's first quarterly report comes out after much criticism from taxpayers and lawmakers that big banks who have received TARP funds have continued to spend as if they were spending their own money, and that little has been done to help struggling homeowners and help thaw the credit markets.

The New York-based bank said that its goals in the use of TARP funds were to "help expand available credit for consumers and businesses, restore liquidity and stability to the capital markets, and support the recovery of the U.S. economy."

The bank promised not to use TARP funds for "compensation and bonuses, dividend payments, lobbying or government relations activities, or any activities related to marketing, advertising, and corporate sponsorship."

Citi Chief Executive Officer Vikram Pandit said, "Americans from all walks of life are facing real economic hardship, and Citi must do whatever we can to help them. Our responsibility is to put TARP capital to work quickly, prudently, and transparently to support U.S. consumers, businesses and our communities during these challenging times."

"To this end, Citi is working in partnership with the Government to increase available lending and liquidity in the U.S financial markets and to help put the U.S. economy back on track," Mr. Pandit added. "We have already approved $36.5 billion in initiatives backed by TARP capital that are consistent with the objectives and spirit of the Treasury program.

And, as part of our ongoing business, Citi continues to lend to consumers and businesses in the United States, where we extended approximately $75 billion in new loans during the fourth quarter."

Citi said shortly after receiving the initial TARP money, they created a Special TARP Committee of senior executives to approve and track the use of those funds. Of the approved $36.5 billion in TARP funds, the bank has allocated the money as follows:
  • $27 billion to U.S. residential mortgage activities - by direct lending to homebuyers and purchases of prime residential mortgages and mortgage-backed securities on the secondary market.
  • $2.5 billion for personal and business loans - includes $1.5 billion in consumer lending and $1.0 billion for tailored loans to people and businesses facing liquidity problems.
  • $1 billion for student loans - originated through the Federal Family Education Loan Program (FFELP).
  • $5.8 billion in credit card lending - includes new accounts, increased credit limits, and balance-consolidation offers.
  • $1.5 billion in corporate lending - commercial loan securitizations to inject liquidity into the corporate loan market.Citi reported that it has helped about 440,000 homeowners - whose combined mortgages totaled approximately $43 billion - avoid foreclosure since 2007. And, it said that four out of five troubled borrowers with Citi-serviced mortgages were able to keep their homes over the past year.
Citi said that it will be adopting the streamlined model for post-delinquency loan modification programs developed by the Federal Deposit Insurance Corporation. The bank has established the Citi Homeowner Assistance Program and continues to reach out to homeowners who may be having financial trouble even though they are current on their mortgage payments.

The report also stated, "We are continuing our foreclosure moratorium for eligible borrowers with Citi-owned mortgages who work with us in good faith to remain in their primary residence and have sufficient income to make affordable mortgage payments." The bank said it has worked with investors and owners of more than 90% of the 4.3 million mortgages it services, so that more qualified borrowers can benefit from this moratorium.

Mr. Pandit stated in the report, "The Government, on behalf of American taxpayers, has invested in Citi. We have an obligation to repay that confidence in ways that go well beyond the $3.41 billion that Citi will pay the Government each year in dividends associated with its TARP investment and a separate loss sharing agreement."

He added, "We will continue to work in partnership with the Government to help put the economy back on track. As we work to expand the flow of credit and as confidence begins to return to the financial system and the U.S. economy overall, we will continue to evaluate our use of TARP capital to help ensure that we deploy it appropriately. We look forward to updating you after the end of the first quarter."

Citi received $25 billion on October 28, 2008 and then another $20 billion on December 31, 2008. In exchange for TARP funds, the U.S. Treasury Department received preferred stock in the bank. On January 16, 2009, the bank issued another $7 billion in preferred shares as part of a loss sharing program with the government.

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Monday, 13 July 2020

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