Thread: Taxpayers to rescue in $20 billion Citigroup bailout

Hmmm....again....OK, we bail them out again.....I really do like my bank a lot and they treat me real good but we don't get deals like this when things go wrong in life.

If your going to throw money away like this then they should have just threw it away at the big three auto.


Taxpayers to rescue in $20 billion Citigroup bailout
BY HELEN KENNEDY
DAILY NEWS STAFF WRITER

Monday, November 24th 2008, 4:44 AM

The federal government agreed late Sunday night to bail out Citigroup, a dramatic move that could save the troubled New York financial giant.

Taxpayers will spend $20 billion for a stake in Citigroup and will guarantee as much as $306 billion of risky loans and securities backed by commercial and residential mortgages.


The deal was unveiled just before midnight after Citigroup execs and U.S. officials spent the weekend haggling over details of the plan. It was announced jointly by the Treasury Department, the Federal Reserve and the Federal Deposit Insurance Corp.

"The U.S. government is taking the actions necessary to strengthen the financial system and protect U.S. taxpayers and the U.S. economy," the three agencies said in a statement.

Stock futures rose on the news of the detail, which investors apparently believe could reverse a brutal 60% plunge in Citi's stock price last week.

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The move is aimed at shoring up the massive New York-based conglomerate, which has 200 million customers in 100 countries.

The $20 billion cash injection by the Treasury Department will come from the $700 billion financial bailout package. The capital infusion follows an earlier one - of $25 billion - in Citigroup in which the government received an ownership stake.

Taxpayers will get preferred stock that pays an 8% annual dividend, officials said.

In addition, Treasury and the FDIC will guarantee against the "possibility of unusually large losses," the deal said. The bank is one of the world's biggest owners of "collateralized debt obligations" - the so-called toxic bundles of mortgage-backed securities that are dragging down the global financial system.

As part of the deal, Citi agreed to accept limits on executive compensation and severance packages - a key concession as taxpayers worry about corporate excess.

It also agreed to implement the FDIC's program to help struggling homeowners modify their mortgages, a move the giant resisted before.

The company has $2 trillion in assets but took a bath last week when investors began dumping shares.

Last Monday, CEO Vikram Pandit announced mass layoffs and a fourth consecutive quarterly loss - for a total of more than $60 billion.

Citigroup's stock closed Friday at $3.77, down from an all-time high of $55 two years ago.

hkennedy@nydailynews.com

Originally Posted by bio-chem

ask Gaz