Citigroup's Bailout Update: Citigroup's past losses may have helped it win Costco business

Reuters reports:

Citigroup Inc had at least one advantage in its successful bid for the exclusive right to issue credit cards for Costco Wholesale Corp, rivals and tax specialists say: it lost so much money during the financial crisis that it has billions of dollars of tax credits.

Citigroup and Costco have not disclosed terms of the deal, and outsiders can only speculate about the reasons Citigroup bid aggressively enough to win the business.

But officials at two rival banks said they suspect Citigroup's tax credits allowed it to offer Costco better terms than competitors could. They declined to be identified because the negotiations were confidential.

At the end of last year, Citigroup had $49.5 billion in net tax credits, known as "deferred tax assets." They are a boon to the bank because they can reduce - or even eliminate - its federal income tax liability. Other banks could pay as much as 35 percent of their U.S. income in federal tax, though many also use tax-reduction strategies that push their rates lower.

In a free market in banking: Citigroup would have been allowed to go out of business. Unlike the constant and unfair continuing bailout.