As the last huge bank waiting to pay back TARP funds, Citigroup's desperate attempt to claw itself out of government control has succeeded: the megabank will sell stock to return $20 billion to taxpayers, while the government will begin to wind down its 34% stake in the company.

In light of the hysteria a year or so ago over "socialism" and government-run banks, this separation is good news. But the flip side is that Citigroup has to shoulder the enormous cost while still holding a bevy of toxic assets that haven't been shed. Some analysts think a nudge could send the company tumbling into the government's arms once again. Plus, Citi will now be free of pay restrictions on twice bailed-out firms.

Given renewed scrutiny on Obama's relationship with Wall Street spearheaded by crusader Matt Taibbi (covered by the Wire here and here) and the president's vow over the weekend to take an aggressive stance against "fat cat bankers," is it a good idea to cut the strings on Citigroup?

  • Too Soon, writes Douglas A. McIntyre at 24/7 Wall St. With billions of dollars of toxic assets still on the company ledgers, Citigroup may be trying to leave too soon, but the government is faced with the quandary of wanting to give the appearance that TARP worked, without allowing Citi to come limping back. "The government can afford to wait until the middle of next year to decide if it wants to walk away from the big bank completely."
  • Painful for Shareholders, suggests Mike Shedlock at Mish's Global Economic Trend Analysis. "Mish" reflects on how many subsidiary firms Citi has shed over the last year. He then guesses what could be sold to raise $20 billion. "Whatever it is, shareholder dilution will come into play, either directly by a stock offering or indirectly by Citi selling off another asset...Whatever it sells, Citigroup will have gone full circle."
  • Citi Knows It Will Be Tough  Published in Dealbook, a memo from Citigroup CEO Vikram Pandit to his staff this morning suggests that the bankers still see a long road to recover. "There are still economic challenges ahead that require your continued focus on clients and disciplined execution."
  • ...But Remember How Far They've Come  A report from Nathan Becker in the Wall Street Journal briefly takes a look back at Citigroup's long, dark year, as a way to set off the good news. "It wasn't all that long ago that Citigroup was facing humiliating talk of nationalization and its share price swooned to 97 cents in March from a record $55 in 2006. The unraveling of Citigroup's shares began as the bank suffered writedowns of more than $30 billion two years ago from risky mortgage bets, forcing the ouster of CEO Charles Prince."