Dump This Bank!

Who's the biggest banker in the world? At one point, arguably, you were. The U.S. Taxpayer.

When the Treasury Department bailed out Wall Street in 2008, American taxpayers became involuntary investors in many of the biggest names in banking: Goldman Sachs (NYSE: GS  ) . JPMorgan Chase (NYSE: JPM  ) . American Express (NYSE: AXP  ) .

No sooner did they get the money, though, than these banks promptly began clamoring to pay it back, with interest. Anything to get the Federal watchdogs to unclench their teeth from the bankers' pinstripe bottoms. Seems the banks didn't necessarily want taxpayer support (at least, not with strings attached), and already.

Your wish, our command -- good riddance
And it looks like one more banker is about to get its wish. Following in the footsteps of its better-balance sheeted brethren, Citigroup paid, back in December, $20 billion out of the $45 billion in TARP funds it had received. As for the balance, which Treasury had converted into an equity stake in the bank, the U.S. Treasury began selling that off this year. So far, one-fifth of our Citigroup (NYSE: C  ) stake has been liquidated, with more sales in the offing:

Over the course of 23 trading days in April and May, the Treasury liquidated Citigroup shares. Selling at an average rate of 65 million per day, it raised an estimated $6.2 billion in cash. That's a 27% profit compared to the government's initial buy-in price of last September -- not a bad return, considering that the S&P 500 as a whole is basically flat over the same time period.

Encouraged by its success, Treasury has already authorized Morgan Stanley (NYSE: MS  ) to facilitate the sale of another block of 1.5 billion Citi shares. If they maintain this sales pace, taxpayers could finally be done with this stock in just a little more than four months' time.

Foolish takeaway
What's it mean to you, the investor? Downwards pressure from the government's fire sale may be contributing to Citi shares' 16% slide over the past month. If you're looking for a pop in Citi stock, you might want to wait till the sales run their course. On the other hand, there's nothing like having a "motivated seller" on the other side of your trade to help you snag an attractive price. Perversely, the best time to buy Citigroup stock might be right smack-dab in the middle of the Treasury's selling spree.

At least, that's the way I see it. But what do you think? Take the Foolish Rorschach test, and give us your read on the chart up above, down below.

Fool contributor Rich Smith does not own shares of, nor is he short, any company named above. Check out his latest stock recommendations on Motley Fool CAPS. The Motley Fool has a disclosure policy.


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Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On May 28, 2010, at 4:10 PM, pcgeekus wrote:

    Depends on whether you have a long term or short term view. In the short term, you can buy and sell in the small moves. If you have the long term view, buy now, it'll hit $5 by year's end.

  • Report this Comment On May 28, 2010, at 4:31 PM, chambolle wrote:

    Ditto. In a few trading days, I bought a 10,000 share block of C at $3.65 and sold it at $4. I've been trading the stock this way for months now, picking up a few grand here, a few grand there, with an initial investment of under $40,000. In the last cycle, I bought in at $3.25 and sold at $4.95, a swing which did not take long at all. Now where I come from, that's not a difficult way to make money. And at some point, I think C will break out and trade in the teens. For an individual investor with a little bit of money to toy around with, it sounds like a no brainer to me. Beats working! So go ahead, Fool, dump on C all you want. All you do is help create buying opportunities pour moi.

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