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Feds OK Massive $20B Citigroup Bailout

Taxpayers will also back $300 billion in shaky debt

By Jess Kilby,  Newser User

Posted Nov 24, 2008 3:49 AM CST
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(Newser) – The US will bail out Citigroup with $20 billion in fresh capital and a guarantee to mop up $306 billion in toxic assets, the Wall Street Journal reports. The deal, announced late last night, marks a turning point in the financial crisis: In addition to injecting nearly $300 billion into the nation's financial institutions, the feds now seem willing to take on selected banks’ bad assets as well.

Under the plan, Citigroup will absorb the first $29 billion in losses on the portfolio of bad assets, and the taxpayers will take on 90% of anything over that. No management changes are required, but Citigroup has agreed to comply with executive compensation limits and to modify distressed mortgages to curb foreclosures. Citigroup stock fell 60% last week, to a 16-year low.

People stand outside the Citibank branch on Park Avenue last week.
People stand outside the Citibank branch on Park Avenue last week.   (AP Photo/Jin Lee)
Women walk beside a Citibank branch in Hong Kong last week shortly after Citigroup announced it was axing some 50,000 more employeesin a bid to stem huge losses.
Women walk beside a Citibank branch in Hong Kong last week shortly after Citigroup announced it was axing some 50,000 more employeesin a bid to stem huge losses.   (AP Photo/Kin Cheung)
A man talks on a phone at Citibank on Park Avenue last week. The federal government has agreed to inject $20 billion in cash into the troubled institution and back some $300 billion in shaky debt.
A man talks on a phone at Citibank on Park Avenue last week. The federal government has agreed to inject $20 billion in cash into the troubled institution and back some $300 billion in shaky debt.   (AP Photo/Jin Lee)
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COMMENTS
Showing 2 of 2 comments
Guest
Nov 24, 2008 5:59 AM CST
I don't think these things should signal that the fed is now willing to take on bad assets at selected banks.It should indicate that decisions will be made case by case. Paulsen needs to explain himself here after his earlier comments of stabilization
Guest
Nov 23, 2008 7:28 PM CST
Where do you go to get a hand-out?

Feds approve record bank bailout
Reuters

 
Citigroup • bank • Citibank • bailout • bank failure • rescue package • financial crisis

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