China May Scuttle $2B Citigroup Bailout

Sources say China's government is standing in the way of the deal
By Jim O'Neill,  Newser User
Posted Jan 14, 2008 7:28 AM CST
Citigroup Inc. provided this file photo Vikram Pandit. The ascension of Indian-born leaders like Pandit, the new CEO of Citigroup Inc., tracks the economic rise of their home country, once seen by U.S....   (Associated Press)
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(Newser) – On the eve of Citigroup’s fourth-quarter earnings announcement, the Chinese government appears to have raised objections to China Development Bank's purchase of a $2 billion stake in the struggling financial giant, reports the Wall Street Journal. The proposed deal, reported by the Journal over the weekend, is part of an $8-billion to $10-billion infusion Citi has been trying to put together from a number of foreign investors.

Citi hopes to offset its earning report tomorrow—expected to contain a large dose of additional subprime writeoffs—with news of a lifeline from these investors to stabilize its capital base. US banks have looked to China several times for bailouts, most recently a $5-billion investment in Morgan Stanley by China Investment Corp.