Wells and Citi Repay $45bn in TARP Dollars

Wells Fargo (WFC) and Citigroup (C) repaid $45bn in Troubled Asset Relief Program (TARP) investments to the US Treasury Department, pushing the total amount of repayments to $164bn. The Treasury received $25bn from Wells under the Capital Purchase Program (CPP), which provides capital to financial institutions since its creation in October 2008. Citigroup repaid $20bn from the Targeted Investment Program (TIP), which provides investments in institutions deemed vital to the overall health of the financial system. The Treasury expects both programs to wind down at the end of 2009 and estimates that total repayments will exceed $175bn by the end of 2010, cutting the American taxpayers’ exposure to the institutions by 75%. Effective today, the Treasury, the Federal Reserve, the Federal Deposit Insurance Corporation (FDIC) and Citigroup terminated their agreement that the US government would share losses on a $300bn pool of Citi assets. The parties agreed to the arrangement in January 2009 and expected it to last 10 years. Under the agreement, the US government did not pay any losses and will hold on to $5.2bn of the $7bn in trust preferred securities and warrants for common shares issued by Citigroup as consideration for the guarantee, according to an announcement from the Treasury. Currently, the Treasury estimates that TARP programs will earn a profit due to dividends, interest, early repayments and the sale of warrants. The Treasury initially expected the investments totaling $245bn in 2009 to cost $76bn. As the Treasury sells warrants in the weeks ahead, taxpayers could earn more than the $16bn in profits already realized. Write to Jon Prior.

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