The Treasury Department announced they hired Morgan Stanley to help them sell their stake in Citigroup (NYSE:C), which they acquired under the TARP program after the bank received billions in aid from taxpayers.
A number of companies had been vying for the business, including Goldman Sachs (NYSE:GS), who reportedly had offered to do the deal for close to nothing, supposedly because of how it could position them in a positive light.
Sources said the government resisted the Goldman Sachs offer because of the negative publicity connected to them during the financial crisis, but then when you think of the other banks in the crisis, they weren’t exactly on the most-popular lists of people in the country either.
Treasury Secretary Timothy F. Geithner attempted to spin this as a confirmation that the government did the right thing in rescuing Citigroup, but that’s hardly convincing at best, and anyone following this knows they were and are lucky, and it’s still not over yet.
This does cause a question to come to mind though in following the sudden and unexpected increase in the share price of Citigroup, which has nothing in their fundamentals to justify it.
Has the government been on the phone behind the scenes pulling strings in the matter? When you look at some analysts who are gushing over Citigroup, it is extremely puzzling as to why that’s the case, as the underlying fundamentals haven’t changed, and they’re still in the middle of divesting of troublesome assets through Citi Holdings.
It’s going something like this: We’re supposed to look at the government getting rid of Citigroup, bid the share price of the company up because of that, and everybody is a winner. That’s a really poor reason for someone to invest in the company, although I do understand the value of the government leaving the company alone. Still, many think that is already priced into the share price, so it makes you wonder what’s really happening there.
Whether there’s something going on behind the scenes or not, Morgan Stanley will be handling the sales of the shares, and they should get a nice bit of business out of that.
