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.