'Taxpayer's Going to Make Money on This'

Former Citigroup CEO Sanford Weill is optimistic about $250 billion bank deal.

ByJonann Brady via via logo
October 14, 2008, 7:24 AM

Oct. 14, 2008 — -- Sanford Weill, the former chairman and CEO of Citigroup, said that while the United States is in the midst of a recession, he's very optimistic about the government's plan to inject $250 billion into the banking industry.

"I think the taxpayer's going to make money on this, but most importantly, it frees up the banking system," Weill said in an exclusive interview with "Good Morning America."

Weill said the U.S. government borrows money at the rate of 1 percent to 2 percent, and gets a minimum 5 percent rate of return.

"So the taxpayers should be making an interest profit right from the very beginning, and I think they'll be paid back all their money," he said.

Investors, too, are optimistic, as the Dow Jones industrial average gained a little more than 11 percent Monday, the largest single-day increase since the 1930s.

The market rebound was sparked by Monday's announcement by European leaders that they would pump $3 trillion to save banks there.

President Bush announced this morning that the federal government will spend $250 billion of that $700 billion bailout package to buy stakes in U.S. banks.

The country is in a recession, Weill said, and there are still tough times ahead.

"I think we're going to see significant jobs lost over the next six months," he said.

But the former chairman of the world's largest bank called the unified international reaction to the global stock market plunge "phenomenal" and "unprecedented."

"This puts a bottom on how low that recession will go, and gives people hope that there will be lending to companies again, that small businesses will be able to have the money to grow. That people will be able to refinance their mortgages, so not everybody's going to be thrown out on the street," Weill said.

When asked whether he'd lost a lot of money during the recent market plunge, Weill said simply, "Yeah, I did."

But he continued, "I think we're in the right place. How could we possibly imagine that an American government with an election coming in 20 some-odd days would have the Republicans and Democrats agreeing on something."

"The executive branch and the legislative branch agreeing that this was really necessary, I think it shows you what America is all about. When the times get tough, we can pull together and I'm very optimistic."

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