Citi faces Trump, Dooger influences as the U.S. government’s preferred bank

President Donald Trump’s campaign to cut spending at all levels of the government is causing a series of headaches for his banker of choice: Citigroup Inc.

Over the years, New York lenders have provided the federal government with most predictable, largely invisible jobs, including issuing company cards for civil servants and payments and wages from processing agencies. Now its role as a financial middleman has gained the bank in a political struggle that is longed to avoid.

Citigroup is known in at least six lawsuits as defendants along with U.S. agencies that ruled that the government and banks illegally seized funds. Meanwhile, Trump’s executive order freezes spending on corporate cards for government employees in February sparked heated discussions at banks, making millions of dollars from those card transactions.

Now, the bank also stands out from the impact of the new government’s tariffs, which dropped Citigroup shares by 12% on Thursday, its biggest one-day decline since 2020.

According to X’s update, Trump limits the charges for hundreds of thousands of government cards to $1 in February, while Elon Musk’s government efficiency ministry reviews across accounts spending.

U.S. civil servants spent nearly $13.8 billion on Citi cards in the last government fiscal year, according to the General Services Administration. This is $20% of the $70 billion charged by all customers to Citigroup Commercial Cards in 2024.

Rodney Lake, director of the George Washington University investment institute, said Citigroup has been trying to address regulatory concerns about data management and risk control since 2020, and he hopes to take care not to harm its relationship with the government.

“Citi is basically stuck in the middle,” Lake said. “I don’t think anyone wants to lose the U.S. government as a client, so it puts them in a tough situation of how to comply with new demands.”

Citigroup CEO Jane Fraser held a series of issues in Washington last week, a person familiar with the matter said.

“We are proud to call the U.S. government a client and bring our capabilities to support several different federal agencies,” Ed Skyler, the bank’s director of corporate services and public affairs, said in a statement. “We have gone through many presidential transitions and have been adapting to the natural changes in priorities that have occurred.”

The bank has arranged a number of payment functions for government agencies, including the recently frozen transfers by the Trump administration. Citi was appointed along with the Environmental Protection Agency in a lawsuit filed by the Environmental Protection Agency, which calls for a multi-billion-dollar green initiative to freeze.

The Judicial Climate Fund legal application showed that the bank “accidentally began to reject” Biden-era greenhouse gas reduction fund’s requirements despite its “clear contractual obligation to do so.” It is clear that the bank’s actions are “not voluntary, but rather the result of the EPA’s extension and illegal stress campaign.”

The bank attempted to distance itself from the government’s actions, believing it was bound by law to comply with the directions of the EPA and the Treasury Department to require it to suspend its accounts. The judge has not ruled the fate of the disputed funding.

Last month, Citigroup was also captured between two strong clients, when the federal government paid $80 million from the Federal Emergency Administration to a Citigroup account in New York City. The move was called “unprecedented” by the city’s auditor-general Brad Lander.

The government said the initial transfer was a mistake and payments were being suspended to ensure that the money was not used to promote criminal activity. Citigroup has abandoned the city’s overdraft fees after unexpectedly entering the red, and New York is now suing the government for recovery funds.

Citigroup is not alone in companies trying to avoid the anger of the Trump administration.

The government has publicly criticized private institutions that it expressed opposition to its policies, forbidding law firms from failing to work in the government and revoking funds from universities. Trump also claimed that the big banks selected the operations of Bank of America in January. This is an allegation the company denies.

Even if revenue from frozen spending is modest, Citigroup has adapted to the restrictions imposed by Trump. Like other federal contractors, it was forced to cancel its target for labor diversity after enforcing executive orders that prohibit “illegal DEI”.

With the help of Emily Birnbaum, Zoe Tillman, Aaron Gordon, Gregory Korte and Peter Jeffrey.

This article was generated from the Automation News Agency feed without the text being modified.