While no one can be sure its big new bet on Citigroup will be a winner, the US government priced it right by agreeing to a reported $3.25 a share conversion price with no new investment for the preferred stock it is buying. This premium of 32 per cent over Citi’s closing market price on February 26 gave the US government the possibility of owning 36 per cent of Citi’s common stock, a substantial improvement in the financial terms of its prior investment. It also gives Citi the prospect of a major equity infusion. These terms reflect the important fact that the Treasury is a public rather than a private investor.

This deal must be seen against the background of the February 6 report of the Congressional Oversight Panel which, based on a valuation analysis of Duff & Phelps, accused the Bush-Paulson Treasury of “shortchanging” taxpayers by “overpaying” by some $78bn for the preferred stock and equity warrants (at a 30-day trailing average stock price) it received in return for its $254bn in troubled asset relief programme investments in major banks and AIG. More recently, COP attacked the Obama-Geithner Treasury for not responding to its earlier criticisms. On deeper inspection, this claim of overpayment is seriously wanting because it fails to recognise a central fact: the Treasury is a public, not a private, investor.