Citigroup Uses $45 Billion to Cut Down Foreclosures Houses

Time icon May 15th, 2009 by Autor Joseph Smith

Citigroup, one of the country’s largest banks, has increased its lending programs for state governments, municipalities, educational institutions and nonprofit hospitals so that they can fund programs aimed at helping distressed families and rehabilitating communities battered by foreclosures houses.

Citigroup

At the end of March, the Citigroup committee supervising the use of funds from the Troubled Asset Relief Program decided to increase its budget for lending from $36.5 billion, the amount announced in February, to $44.75 billion. The allocation was increased to include financial assistance to municipalities that would use the money to mitigate the effects of forclosures houses.

David Brownstein, managing director and public finance co-chief at Citigroup, said the municipalities borrowing the money are financially secure, but they need the money to help them cope with difficulties in credit markets downed by forclosures houses. Besides, borrowing from an institution helped by TARP would ensure that municipalities reduce their borrowing costs.

In addition to the money given to local governments and institutions, Citigroup said it will spend $2 billion to finance suppliers of loans, $1 billion to fund housing mortgage loans and $250 million to support auto loans.

All in all, Citigroup has already committed over $200 billion to lending since October 2008, the month Citigroup received $25 billion in bailout funding from the TARP fund. Congressional members during the Bush administration approved the TARP fund to help stabilize the financial sector and help slow down the pace of forclosures houses.

A total of $700 billion was allocated to TARP so that the Bush administration can save the financial system from collapsing. The first half of the $700 billion was spent by the Treasury Department to shore up the finances of large banks and other financial institutions and to rejuvenate lending activities.

In November last year, Citigroup received another $20 billion, bringing the total amount received in October and November to $45 billion.

This year, Citigroup agreed to turn part of the TARP money received from preferred stocks to common stocks.

Last week, the Federal Reserve released the results of its stress tests on the nation’s 19 largest banks. The tests were designed to determine if the banks are able to surpass the economic crisis, which was largely caused by foreclosures houses. Citigroup has a shortfall in capital by $5.5 billion. The bank announced that it will solve the shortfall problem by converting a higher number of preferred stocks to common stocks.

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