profitable bank bailouts

Bank bailouts are turning out to be great business for the government. Unfortunately for taxpayers, other federal rescues will almost certainly wind up in the red.

The Treasury Department said Monday it will begin selling its stake in Citigroup at a potential profit of about $7.5 billion -- not a bad haul for an 18-month investment.

The move is a major step in the government's effort to unravel investments it made in banks under the $700-billion Troubled Asset Relief Program at the height of the financial crisis.

Yet a year and a half after Congress passed the big bailout, other parts of it — particularly troubled automakers General Motors and Chrysler and insurer American International Group — show no signs of being profitable.

Despite the returns from Citi and other banks, analysts and even the Treasury Department predict the bailout will wind up costing taxpayers at least $100 billion. The bailouts of mortgage giants Fannie Mae and Freddie Mac, which were not included in TARP, will add billions more.

But the money the government makes off banks helps offset the damage. With the sale of the Citi shares, the eight major banks that got bailout money funds will have repaid the government in full. Those investments have netted the government $15.4 billion from dividends, interest and the sale of bank stock warrants, which gave the government the right to buy stock in the future at a fixed price.

Based on Monday's share price, selling its 27% stake in Citi would add about $7.5 billion in profits. The stock fell 3% to $4.18 a share Monday after news of the planned Treasury sales. But that still puts it well above the $3.25 a share the government paid.