Citi And Wells Fargo To Pay Off Loans
Well, this was expected. Both Citigroup and Wells Fargo have announced that they’re close to paying off the bailout money that they got from the federal government last year, following in the footsteps of Bank Of America, who did it a week ago.
Wells Fargo is going to create $10.4 billion dollars in new stocks, use money they’d put aside for bonuses, and sell $1.5 billion of its assets to try to reach the amount. Citigroup is going to sell $20.5 billion in stock, and the government will sell the 34% of shares it got from Citi to pay off the difference, as they owed $25 billion. I did have a question answered for me when it was announced that the worth of Citigroup’s shares will drop drastically, and their stock price took a 6% hit off the announcement.
The “why” is still a big question for me. Citigroup doesn’t have the worries that Bank of America did in trying to hire a new CEO, but supposedly they felt restricted anyway by the pay czar, and they were losing some of their staff to other banks that didn’t have any pay restrictions for any of their positions. Still, with all 3 banks still having problems, it begs the question why they’re paying the money back now, when they still had another 5 years to pay it off. Is reputation that critical at this juncture, even though their reputation still stinks because of other moves they’ve made?
Wells Fargo, for what it’s worth, had stated that they never needed the bailout money in the first place. I’m not so sure about that, seeing how they have to raise the funds, but their stock price would indicate that they’re in a much safer position than Citigroup. Either way, these were the last two banks on the TARP program, so now we’ll get to see how well all these banks handle themselves on their own, especially now that there will be no more government protection coming.