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Treasury hires Morgan Stanley to handle Citigroup shares

Nancy Marshall-Genzer Jul 23, 2010

Treasury hires Morgan Stanley to handle Citigroup shares

Nancy Marshall-Genzer Jul 23, 2010


Kai Ryssdal: Citigroup stock gave up a bit more than a percent and a half today. Tough to know whether that was an actual profit-and-loss judgment investors were making, or the fact that the Treasury Department said today it’s going to unload another big block of Citi shares, part of what taxpayers got in return for their TARP support.

The government selling shares is a little bit like you and me selling shares. They call their broker. The Treasury Department has hired Morgan Stanley for the biggest part of the job. But there’s plenty of action to go around.

Marketplace’s Nancy Marshall Genzer reports from Washington.

Nancy Marshall Genzer: Treasury has already sold a big chunk of its stake in Citigroup. Today officials announced they’ll sell one and half billion more shares. And Morgan Stanley will get a fraction of a cent for every one of those shares sold.

Christopher Whalen is a financial analyst at Institutional Risk Analytics. He says Treasury threw Morgan this mult-million dollar bone, because Morgan needs a little love. Right now, it’s the runt of the litter among the big brokerage houses.

Christopher Whalen: Morgan Stanley was arguably the weakest of the remaining firms. So I think part of the reason that Treasury has given Morgan Stanley this business is simply to help them.

And Treasury is trying to help small brokers, too. Morgan is required to subcontract some of the share sales out to a dozen little guys, including small brokerages owned by women and minorities. Now, you may wonder if this largess will cut into how much the government stands to make from the Citigroup sale. Will the small firms be able to get as good a deal for Treasury?

Peter Henning is a former SEC attorney, now teaching law at Wayne State University. He says the little guys may not be able to keep up with Morgan Stanley.

Peter Henning: If you have to go to firms that don’t have the kind of market depth, they may not be able to sell as many shares at the kind of price that the seller wants.

But Joel Naroff of Naroff Economic Advisers says the small brokers are going to work extra hard to keep up with Morgan Stanley, because Treasury will be selling off stock it got from other companies it bailed out, like GM.

Joel Naroff: If these companies do well, then that holds the potential for them to, sometime down the road, possibly be brought back in.

There could be an offering of GM stock as soon as this fall.

In Washington, I’m Nancy Marshall Genzer for Marketplace.

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