Where Did Citigroup Find $36.5 Billion?

Yesterday, Citigroup (C) stated it would deploy $36.5 billion in the coming months to boost its lending efforts by utilizing funds received from the Troubled Assets Relief Program (TARP). This will be in addition to the approximate $75.0 billion in new loans that Citigroup made during 4Q08.

Of the $45.0 billion it received from TARP, $36.5 billion will be used as a partial funding source to support Citigroup’s U.S. residential mortgage activities ($25.7 billion); credit card lending ($5.8 billion); personal and business loans ($2.5 billion); corporate loan activity ($1.5 billion); and student loans ($1.0 billion).

Of the $25.7 billion ear-marked for its U.S. residential mortgage activities, Citigroup has allocated funds to buy securities backed by mortgages that conform to Fannie Mae (FNM) and Freddie Mac (FRE) standards ($10.0 billion); to buy prime home mortgages in the secondary markets ($7.5 billion ); with the remainder ($8.2 billion) going to issue mortgages (a unique concept) issued directly to potential homeowners, to including mortgages with values that exceed the limits set for government-sponsored loan programs.

Management stated it would be making more loans than it would have without TARP, but will not take excessive risk with the capital the American public and other investors have entrusted to the company. Also that management has a responsibility to put these funds to work quickly, prudently and transparently to increase available lending and liquidity.

Citigroup says it would not use the fund for compensation and bonuses, dividend payments, lobbying or government relations activities, or any activities related to marketing, advertising and corporate sponsorship. Interesting statement, since the TARP funds were deployed to Citigroup over two months ago.

We believe the financial institutions were more interested their own capital preservation to the detriment of there customers, as more losses are expected to be exhibited in the coming quarters.

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