Feds OK Massive $20B Citigroup Bailout

Taxpayers will also back $300 billion in shaky debt
By Jess Kilby,  Newser Staff
Posted Nov 24, 2008 3:49 AM CST
Feds OK Massive $20B Citigroup Bailout
People stand outside the Citibank branch on Park Avenue last week.   (AP Photo/Jin Lee)

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.
(More Citigroup stories.)

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