Surging market gives government $11 billion profit on Citigroup

Step aside, John Paulson -- there's competition for reaping billions from bets on the financial sector, and it comes from Uncle Sam. The government, which owns 34 percent of Citigroup (C) following a conversion of preferred stock from the TARP and asset guarantee agreement, has booked an $11 billion paper profit as shares have risen to $4.85 in trading today from the original $3.25 conversion price. The conversion was meant to bolster Citigroup's Tangible Common Equity, or TCE, a new measure being used to determine a bank's ability to absorb losses.

The rebound in Citigroup shares, which fell to under $1 at the height of market distress, is part of a rally in financial stocks as confidence in the sector has been restored. Citigroup has received $45 billion in TARP capital from the government, in addition to a loss-sharing deal reached on a pool of assets in excess of $300 billion.