Citi Toddles Further Toward Independence

Within days of word emerging that it was looking for a way to get the Treasury Department to sell some of its stake in the bank, Citigroup is planning to exit the Federal Deposit Insurance Corp.’s temporary debt guarantee program.

The FDIC wants to wind the program –the Temporary Liquidity Guarantee Program--down by Oct. 31, and Citi, the biggest user of the program, is talking with FDIC officials about getting out of the program then, instead of looking for an emergency extension, Bloomberg reports. The bank had $72.4 billion of FDIC-guaranteed debt as of June 30.

Word of Citi’s willingness to give up the debt guarantees follows reports it was trying to get the U.S. Treasury to sell part of its 34 percent, $32 billion, stake in the bank.

Taken together, the moves show how far the credit markets have come in stabilizing for big banks like Citi. The banks are now more confident they can raise money in private markets. The FDIC program was one of several put in place last fall after the collapse of Lehman Brothers and freezing of the credit markets. The FDIC program backed bank debt with the credit of the U.S. government, allowing them to borrow to keep short and medium term operations going.

So far, the program could be considered a success. It hasn’t faced any guarantee payouts despite having $304.14 billion in FDIC-backed debt issued, and the agency has collected $9.3 billion in fees from banks that have participated.

But the program was always meant to be temporary, and the FDIC has recently signaled it wants to bring it to a close by the end of October.

Citi isn’t the only big player ready to let go of the guarantees.

Bank of America CFO Joe Price said Tuesday his company has approval from the FDIC to exit the program. General Electric Co. said in July its General Electric Capital Corp. had received approval to exit. GE was the second-largest user of the program, with $69.1 billion outstanding at the end of June.