Fed, FDIC Take Hard Line on Citi TARP Exit

NEW YORK (TheStreet) -- The Federal Reserve and Federal Deposit Insurance Corp. are taking a harder line than the Treasury Department on how much capital Citigroup(C) should raise before it repays $20 billion of funds borrowed from the Troubled Asset Relief Program, a report says.

The Fed, Citigroup's main regulator, and the FDIC, which is insuring more than $300 billion in Citigroup's toxic assets, have argued that Citigroup must raise substantial levels of capital before it is allowed to repay TARP, the Financial Times reports, citing insiders. At one point, a regulator told Citigroup it might have to raise up to $20 billion in equity before paying back TARP, a level that could make it impossible for the bank to exit the program in the short term.

The Treasury Department is taking a softer stance and has been more responsive to Citigroup's arguments that it has ample cash reserves to repay TARP without raising too much capital, the newspaper reports.

Citigroup is 34%-owned by the U.S. government. It wants to repay TARP to get itself out from under pay curbs established by the U.S. government, among other things.

Citigroup's efforts to repay TARP follow Bank of America's (BAC) announcement last week that it planned to repay the $45 billion it owes the federal government.

-- Reported by Joseph Woelfel in New York .

Follow TheStreet.com on Twitter and become a fan on Facebook.

>To order reprints of this article, click here: Reprints