The U.S. government abruptly shelved plans to start trimming its 34% stake in Citigroup Inc., after investors demanded a price so low that the Treasury Department would have lost hundreds of millions of dollars on the deal.
The embarrassing reversal came two days after the Treasury said it planned to sell as much as $5 billion of stock in the New York company, as part of Citigroup's plan to pay back $20 billion in taxpayer aid the troubled bank received last year.
At the expected sale price of $3.15 a share, the U.S. government would have suffered a loss of 10 cents per share on its 7.7 billion-share stake in Citigroup, or about $770 million.
Could it be that the Treasury lost a whole bunch of money on the bailouts that it refuses to recognize?
This proposal is not my idea but one I read about in the Financial Times. I believe it is a good one.
Right now the biggest challenge for Treasury Securities is supply/demand. Supply, because of the mountain of debt that Treasury will have to issue to fund government spending. Demand, because of increased appetite for risk and China's potential diversification away from U.S. Treasuries.
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