Citigroup Escapes

And then there were none.

Citigroup has become the last of the Wall Street titans to reach a deal to pay back money the government used to bail it out during last year's banking crisis. The New York Times reports the deal was reached early this morning, after nightlong negotiations between the bank and government officials.

Citi announced the broad deal to pay back the Troubled Asset Relief Program this morning. "The TARP program was designed to provide assistance until banks were in a position to repay it prudently. We are pleased to be able to repay the U.S. government's trust preferred securities and to terminate the loss-sharing agreement. We owe the American taxpayers a debt of gratitude and recognize our obligation to support the economic recovery through lending and assistance to homeowners and other borrowers in need," said Citi CEO Vikram Pandit, in a release.

With confidence returning to financial markets, Citigroup believes it can raise money from private investors to replace the $45 billion the taxpayers have invested in the institution.

According to the release, Citi will immediately issue $20.5 billion of capital and debt. That will include $17 billion of common stock, with an over-allotment option of $2.55 billion; and another $3.5 billion of equity units, with $2.8 billion of that being common stock purchase contracts and another $700 million being recorded as debt.

The Treasury will sell $5 billion in common stock it holds in a secondary offering. The Treasury would then sell its nearly 7.7 billion shares in a series of stock sales to institutional investors over the next several months.

Citi will also end a loss-sharing agreement with the government on about $250 billion in troubled mortgage and credit card assets.

"As I have stated many times over the past year, we planned to exit TARP only when we were convinced that it was prudent to do so,'' Pandit said. "By any measure of financial strength, Citi is among the strongest banks in the industry, and we are in a position to support the economic recovery."

By 2010, Citi will no longer be considered a beneficiary of "exceptional financial assistance" from the government.

The deal will free Citi, like its largest rival, Bank of America, from the restrictions on pay that come with a substantial government ownership of the bank. Bank of America, the largest U.S. bank by assets, paid the government back last week and, partially as a result, appears ready to move ahead on its stalled effort to find a successor to retiring CEO Ken Lewis.

The Wall Street Journal reports Bank of America is close to a deal with Robert Kelly, CEO of Bank of New York Mellon, if the two parties can agree on pay.

So far, bailed-out banks have paid back $136 billion of the $245 billion in government bailout money they received last year—a faster payback than had been expected.

Word of Citigroup's potential deal came on the eve of a White House meeting between President Barack Obama and top Wall Street bankers. The president enters the meeting talking tough.

"I did not run for office to be helping out a bunch of fat-cat bankers on Wall Street," Obama said in an interview on CBS's 60 Minutes program on Sunday. "They're still puzzled why is it that people are mad at the banks. Well, let's see. You guys are drawing down $10, $20 million bonuses after America went through the worst economic year that it's gone through in decades, and you guys caused the problem. And we've got 10 percent unemployment."

The meeting is meant to pressure bankers to start lending more to small businesses and consumers. It also comes after the House passed legislation that includes a financial consumer protection agency.