Citigroup Bailout: Feds Offer Massive Rescue Package To Financial Giant

[Murrican]

http://www.reuters.com/article/newsOne/idUSTRE4AJ45G20081124

Citigroup gets $306 billion rescue from government

Mon Nov 24, 2008 1:06am EST

By Dan Wilchins and Jonathan Stempel

NEW YORK (Reuters) - The U.S. government agreed to a $306 billion rescue plan for Citigroup Inc, agreeing to shoulder some losses from toxic debt in the latest attempt to bolster a financial services industry in turmoil.

Citigroup's package may also prove a template for other banks that are expected to face growing losses as economies worldwide sink into recession. Credit losses once concentrated in mortgages are already bleeding into new, large areas such as credit cards and commercial real estate.

The nation's second-largest bank by assets has the farthest international reach of any U.S. bank, with operations in more than 100 countries. Many analysts have said Citigroup might be too big to be allowed to fail, and that any collapse could cause financial havoc around the globe.

"The market wants some kind of certainty about their losses," said Blake Howells, director of equity research at Becker Capital Management in Portland, Oregon.

The plan announced late Sunday calls for Citigroup to obtain $27 billion of capital by issuing preferred shares. The shares carry an initial 8 percent dividend, higher than the 5 percent it charges dozens of other lenders under its $700 billion financial industry rescue package. Citigroup itself got $25 billion in the earlier package.

Citigroup agreed to absorb the first $29 billion of losses on the $306 billion portfolio, plus 10 percent of additional losses, for a maximum total exposure of $56.7 billion. The Treasury Department could end up absorbing $5 billion, the Federal Deposit Insurance Corp $10 billion, and the Federal Reserve the rest.

The bank will not have to make management changes, but agreed to tighter restrictions on executive pay, and to try to modify troubled mortgages in the $306 billion portfolio. It also cannot pay more than 1 cent per share in common stock dividends per quarter for three years without the Treasury Department's consent. The quarterly dividend is now 16 cents.

[Richard Tafoya]

Huffington Post:
http://www.huffingtonpost.com/2008/11/23/feds-consider-plan-to-res_n_145856.html

The government unveiled a bold plan Sunday to rescue troubled Citigroup, including taking a $20 billion stake in the firm as well as guaranteeing hundreds of billions of dollars in risky assets.

The action, announced jointly by the Treasury Department, the Federal Reserve and the Federal Deposit Insurance Corp., is aimed at shoring up a huge financial institution whose collapse would wreak havoc on the already crippled financial system and the U.S. economy.

The sweeping plan is geared to stemming a crisis of confidence in the company, whose stock has been hammered in the past week on worries about its financial health.

"With these transactions, 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 issued Sunday night. "We will continue to use all of our resources to preserve the strength of our banking institutions, and promote the process of repair and recovery and to manage risks," they said.

[Murrican]

http://money.cnn.com/2008/11/23/news/companies/citigroup/index.htm?postversion=2008112400

If Citibank for $300+ billion why not Detroit for $25 billion?


Citi dodges disaster

The troubled bank secures an additional capital injection from the U.S. government and guarantees on troubled assets.

By David Ellis, CNNMoney.com staff writer

Last Updated: November 24, 2008: 12:59 AM ET


NEW YORK (CNNMoney.com) -- The U.S. federal government on Sunday announced a massive rescue package for Citigroup - the latest move to steady the banking giant, whose shares have plunged in the past week.

The plan has two key features:

First, the U.S. Treasury and the Federal Deposit Insurance Corporation (FDIC) will backstop some losses against more than $300 billion in troubled assets.

Second, the Treasury will make a fresh $20 billion investment in the bank. The government has already injected $25 billion into Citigroup as part of the $700 billion bailout passed by Congress in October.

In return for the latest intervention, the government will receive an additional batch of preferred shares - $20 billion for its direct investment and $7 billion as compensation for the loan guarantees. Citigroup will pay an 8% dividend rate on those shares.

The government will impose other restrictions as well. Citigroup will be prohibited from paying out a dividend of more than a penny per share and will face limits on executive compensation. Plus, it will be expected to adjust mortgages for troubled borrowers, according to procedures outlined by the FDIC.

"With these transactions, the U.S. government is taking the actions necessary to strengthen the financial system and protect U.S. taxpayers and the U.S. economy," said a joint statement by Treasury, Federal Reserve and the FDIC.