Chastised Citigroup grounds plan for new plane

NEW YORK (Reuters) - Citigroup Inc C.N, which received a massive taxpayer-funded rescue last year, canceled plans to buy a $50 million executive jet after politicians criticized the purchase as wasteful.

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The bank ordered the jet in 2005 and on Monday said it planned to take delivery later this year. It also said the new plane would cut costs, and that it would finance the purchase by selling older jets. A person familiar with the matter said the new aircraft was a Dassault Falcon 7X.

But the jet became a lightning rod for criticism, and a White House spokesman said President Barack Obama did not believe using private jets was “the best use of money” by companies receiving taxpayer assistance.

Citigroup received $45 billion from the U.S. government last year, including a $20 billion emergency infusion in November.

A Citigroup spokesman on Tuesday said the New York-based bank now has no intention of taking delivery of any new aircraft. Citigroup previously said canceling the deal would result in millions of dollars of penalties.

U.S. companies face pressure from shareholders and politicians to cut unnecessary costs as the recession pushes earnings lower and results in hundreds of thousands of job losses each month.

Last year, the insurer American International Group Inc AIG.N was pilloried for spending hundreds of thousands of dollars to ferry executives to luxury retreats, even after receiving a taxpayer bailout that later grew to $152 billion.

Several top U.S. bankers, including Citigroup Chief Executive Vikram Pandit, have decided not to go to the glitzy World Economic Forum in Davos this week, in a time of austerity.

Democratic Sen. Carl Levin had pressed the Treasury Department to block Citigroup’s purchase of the new jet.

“To permit Citigroup to purchase a plush plane -- foreign-built no less -- while domestic auto companies are being required to sell off their jets is a ridiculous double standard,” said Levin, who represents Michigan, home to the Big Three automakers.

General Motors Corp GM.N and Chrysler LLC CBS.UL were barred by the Bush administration from operating corporate jets as part of their December bailout.

Additional reporting by Juan Lagorio and Jonathan Stempel; Editing by Steve Orlofsky and John Wallace