So Much For The Taxpayer Profit In Citi: Treasury Shares To Be Offloaded Over 12 Months After Investors Balk At Overpriced Toxic Holdings

It was just a matter of time before the administration’s covert plan of rewarding bank execs for massive failure by allowing them to load up their balance sheets with record risk once again, while paying out historic bonuses, blew up in Larry Summers’ face. Today’s attempt by the government to not only allow the failed Citi management team to pay itself an infinite amount of money more than it deserves for destroying one of America’s landmark companies (why the hell is Vikram Pandit still in charge of the Titanic?) but to pretend that it “generated” another taxpayer win by selling off its shares at a profit, was aborted after hours, when Citi could barely find enough interest to sell $17 billion at the embarrassingly low price of $3.15, below that government’s cost basis. This will preclude Obama from making a TV appearance tomorrow of how the US taxpayer made even more money by backstopping Moral Hazard. What the US taxpayer however did do, is funnel money straight out of its pocket, into that of Vikram’s worthless lackeys. We somehow doubt this will make the teleprompter of whatever it is Obama will be praising in his TeeVeethon tomorrow.

More from the WSJ:

The U.S. government reversed plans to begin reducing its trimming its 34% stake in Citigroup Inc. (C) after investors balked at buying the bank’s shares, according to people familiar with the situation.

Citigroup was nearing completion late Wednesday on the sale of about $17 billion of newly issued shares. But the offering encountered such a lukewarm response that Treasury Department officials decided to hold off on selling any of its shares until next year, these people said.

At the expected sale price of $3.15 a share, the U.S. government would have suffered a loss of 10 cents per share on its 7.7 billion-share stake in Citigroup, or about $770 million.

Treasury officials also agreed not to sell the government’s shares for at least 90 days. The 90-day lockup is a significant concession because the government previously could sell its Citigroup shares whenever it wanted.

Citigroup said Wednesday evening that it plans to go forward with repaying the financial lifelines it got under the Troubled Asset Relief Program. That includes unwinding a deal in which the government shields Citigroup from most losses on $301 billion of assets held by the company.

As Citigroup gauged interest in its huge offering, announced Monday, some investors said they were willing to buy shares only if the company extracted an agreement from the Treasury Department to hold off on any future stock sales for at least 90 days, according to people familiar with the matter.

The government now plans to unload its Citigroup stock gradually over the next 12 months, people familiar with the situation said. That is a major shift from the Treasury Department’s announcement Monday that it planned to dispose of the shares over six to 12 months.

Is this merely one of the ever increasing cracks in the economic team’s bailout plan, which as all investors are fully aware are completely unsustainable in the long run, yet sufficiently plausible over the next 90 or so days (until QE presumably ends) that one more day of buying by various algos may be warranted. Perhaps the 90 days will end up being a far too optimistic expectation.