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Bailout Payback: Wells Fargo, Citigroup Repay $45 Billion In TARP Funds

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SAN FRANCISCO — Wells Fargo plans to sell $10.4 billion in new stock to help repay all $25 billion in bailout aid it received from the government at the height of the market meltdown last fall.

The announcement Monday from the San Francisco-based bank comes hours after Citigroup Inc. said it would repay $20 billion worth of taxpayer funds.

Wells Fargo spokeswoman said the company wasn't making the announcement out of pressure following Citigroup's move.

"We've said for quite some time that we wanted to repay at the appropriate time," she said.

The move will extricate Wells Fargo from the pay restrictions and close oversight that came with the bailout program. The company said it paid $1.4 billion in dividends to the government under the terms of its agreement.

Wells Fargo said it expects the plan will reduce its fourth-quarter income by $2 billion but add to its per-share earnings in 2010. Handing back the money will save the bank from paying $1.25 billion a year in preferred stock dividends.

The company plans to come up with $1.35 billion by awarding stock in place of some of the cash it had planned to use for bonuses and by issuing its stock to company benefit plans.

Wells Fargo also plans to sell $1.5 billion in assets by the end of next year or raise more capital to reach that amount.

Citigroup said Monday it would pay back the $20 billion it took from the government's Troubled Asset Relief Program, which was designed last year to help stabilize the financial system by giving banks a cash cushion.

The money also brought government oversight. Banks have been eager to give back the money to lift restrictions on pay and to sidestep some of the public frustration over big paychecks at some financial companies while the nation's unemployment rate stands at 10 percent.

Banks have been under pressure to tamp down bonus pay. Goldman Sachs Group Inc. said last week its top executives wouldn't get cash bonuses for 2009 and would instead get stock that couldn't be sold for at least five years.

Pledges to repay the government also came on the day top bankers met with President Barack Obama at the White House. He asked them to consider "every responsible way" to boost lending, particularly to small businesses.

Wells Fargo made the announcement about the repayment after the closing bell on Wall Street. Its shares rose 56 cents, or 2.2 percent, to $26.05 in after-hours electronic trading. The stock ended regular trading at $25.49, a gain of 8 cents.

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