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Citigroup, Wells Fargo Clash With Government Over TARP Repayment

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NEW YORK — Citigroup Inc. and Wells Fargo & Co. are seeking to repay billions in federal bailout aid but so far haven't received permission from the government, people familiar with the talks told The Associated Press.

The main sticking point is how much capital the banks would need to raise to repay taxpayers the money they received at the height of the financial crisis, according to two people with direct knowledge of the talks who requested anonymity because the discussions are ongoing.

Citigroup received $45 billion in bailout money and is now 34 percent owned by the government. Wells Fargo received $25 billion.

The government has told Citigroup that it would need to raise at least $20 billion in common equity to be able to quit the Troubled Asset Relief Program, according to one of the sources. It was unclear how much Wells Fargo needed to raise.

Citigroup and Wells Fargo declined to comment. Treasury spokesman Andrew Williams would not discuss the negotiations but said banks "are pursuing discussions to understand what needs to be done to move ahead with repayment."

The efforts of Citigroup and Wells Fargo to repay the money come after Bank of America last week announced it would return $45 billion it had received, adding to the $71 billion already repaid by about 50 other financial companies. Bank of America is using available cash and $19 billion raised from a securities offering to repay its funds.

Banking analysts have said Citigroup and Wells Fargo will face a competitive disadvantage as the last two large U.S. banks still holding TARP funds. Both are subject to restrictions on employee compensation until they repay the government. That's raised worries that top performers will defect to rival firms.

One proposal discussed was for Citigroup to partially repay its TARP funds as a way to escape pay restrictions set by the Treasury's pay czar, Kenneth Feinberg, these people said. But Feinberg's office rejected the idea, they said.

Like other big banks, Citigroup and Wells Fargo have been hit by losses on loans ranging from mortgages to credit cards as more consumers struggle to pay off debt. Citigroup reported $8 billion in loan losses in the third quarter, compared with $5.1 billion for Wells Fargo.

In repaying its TARP funds, Bank of America joins JPMorgan Chase & Co., Morgan Stanley and Goldman Sachs Group as large banks that have cut ties with the government and broken free of pay restrictions.

Repaying TARP money could aid Bank of America's efforts to recruit a successor to CEO Ken Lewis, who announced last fall that he planned to retire on Dec. 31.

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Wagner reported from Washington.

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