August 19, 2009 / 10:40 PM / in 8 years

TARP special inspector to audit Citi guarantee

WASHINGTON, Aug 19 (Reuters) - The U.S. special inspector general charged with keeping tabs on bank bailouts said on Wednesday he would audit a federal guarantee granted last year to protect Citigroup Inc (C.N) from potentially massive loss.

“My office will begin to assemble a team to audit the Citigroup guarantees,” Neil Barofsky, special inspector general for the Troubled Asset Relief Program (TARP), said in a letter to a U.S. congressman who requested the probe.

The Federal Reserve, the Treasury and Federal Deposit Insurance Corp in November guaranteed a $306 billion pool of Citigroup mortgage assets as they fought to prevent the collapse of the U.S. banking system amid a global financial panic.

Citigroup also got a $20 billion capital injection from TARP as part of the rescue, which came on top of an earlier $25 billion TARP injection.

Dramatic official action helped to calm the crisis, but it also sparked public anger over the use of taxpayer money to save rich bankers.

Barofsky said the probe would focus on how the decision to provide the guarantee was made, how the assets were chosen, what the assets are, how risk is being managed, and what safeguards are in place to protect taxpayer interests.

    “We anticipate finalizing the audit plan and issuing a formal audit announcement shortly,” he said in the letter to U.S. Representative Alan Grayson, a Democrat from Florida.

    Grayson said he had questions about the guarantee and what it meant for taxpayers, and he wanted to know much had already been lost if the assets were marked-to-market.

    “I have multiple concerns about the terms of the deal,” he said in the letter to Barofsky, a copy of which was made available to the media. (Reporting by Alister Bull; Editing by Leslie Adler)

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