It’s probably worse to have attempted the paying back of TARP funds and to have failed, than to not have tried at all, which is increasingly looking what Citigroup (NYSE:C) should have done.

Trying to ride the skirts of Bank of America (NYSE:BAC) and Wells Fargo (NYSE:WFC), it seems that Citigroup CEO Vikram Pandit prematurely made his move in an effort to make the financial condition of Citigroup on the same level as Bank of America and Wells Fargo, which obviously failed miserably.

Not only does it keep the shackles of the government around the company, but it also very publicly announced the ongoing weakness of Citigroup, and that it’s far from financially healthy and able to pay back the TARP funds without significantly devaluing the stock, which wasn’t even able to respond to the Treasury selling them to break even.

Although Citigroup sold $17 billion of its shares at $3.15 each to raise capital to help pay off TARP funds, the Treasury was unwilling to do that, as they paid $3.25 a share when they bought into the company.

If the Treasury were to sell at a loss they would take another public relations hit and appear the fool, which they’ve already done enough during the economic debacle.

The problem Citigroup faces after this particular ill-advised situation is how they deal with the disaster which even further exposed the fragility of the company and the long time it will take to bring them back to profitability.

There is very little chance we’ll see some type of major turnaround at Citigroup for some time, as that is the only thing that could help the stock hold at $3.25 or more a share, which then the government could divest themselves of their shares.

The only other possibility would be if the market at large were to really take off over the next year and pull Citigroup with it. That’s a very unlikely scenario, and that leaves Citigroup with the government hanging around its neck with no short-term means of getting rid of them.

It also makes Citigroup stick out in a way they hate to, now being the only major bank left with TARP funds to repay and the limitations imposed on it by the government concerning executive pay and bonuses, and who knows what else.

One thing for sure, the pressure on Vikram Pandit will increase to the point where he will either have to deliver or he’ll be ousted. While many understand much of where Citigroup is happened before his tenure as CEO, they do expect him to start delivering profits to lead the company out of the morass they’re in.

If Pandit doesn’t do that fairly soon, there’s no doubt pressure will mount on the board of directors of Citigroup to replace him. At this time they seem to support him fairly strongly.

For the governments’ role, they will be viewed as interferer’s in the company, and definitely could be detrimental to Citigroup becoming profitable over the next year, depending on how deeply they interfere in its operations.

Until they extricate themselves from the government, Citigroup will be considered tainted and damaged goods. That’s something that must be dealt with as soon as possible without harming the company.