Profits on Citigroup Stock: Can They Be the Basis for Financing Stimulus?
Last month the government announced plans to sell the stock it obtained in November of 2008 as part of its bailout package of Citigroup. The media jumped on the fact that, at the stock’s current market value, the government stands to earn an $8 billion profit on this stock. This profit was widely touted as evidence of the success of the bailout. In reality, the government’s profit on Citigroup stock was primarily the result of its own willingness to back up Citigroup. The increase in Citigroup’s stock price was largely driven by investors’ realization that the government would not let Citigroup fail.
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