Did Citigroup Get a Cushy Break?

As Citigroup began selling new stock to repay $20 billion in borrowed TARP money, the White House acknowledged Wednesday the bank was being let of the hook for billions in taxes.

The IRS waiver allows Citigroup to get up to a $38 billion write off against the money it lost in the crisis. The potential savings: several billion dollars, reports CBS News correspondent Anthony Mason.

"It all seems to be a bit of accounting sleight of hand, where the taxpayer yet again losses with this administration," said Rep. Jeb Hensarling, R-Texas.

White House Defends Citigroup Tax Break

All of the nine of the country's major banks have now announced plans to pay back their TARP loans. Overall, the treasury estimates taxpayers will make a $19 billion profit from interest payments. The White House has been anxious to get the government out of the financial industry and the banks back on their feet.

But analyst Paul Miller said the banks still hold billions of dollars in bad mortgage loans on their books. By one estimate, nearly 7 million mortgages are in trouble and could be headed for foreclosure.

"The balance sheets still have a lot of losses on them and it is going to take a couple of years to fix those losses," Miller said. "So, no, we're not completely out of the woods yet, but we're in a much better condition today than we were a year ago."

That's because the credit markets are moving again. But if mortgage losses were to suddenly surge in the next 18 months, banks could end up looking to Washington for help again.

  • Anthony Mason
    Anthony Mason

    CBS News senior business and economics correspondent; Co-host, "CBS This Morning: Saturday"