Citigroup Nationalization: Good Bank, Bad Bank

Events continue to unfold.

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Several sources are now reporting that Citigroup is nearing a deal with the government to create a seperate "bad bank" to house $50 billion worth of toxic mortgage and other assets, as well perhaps a $1 trillion or more in off-balance-sheet entitites. The WSJ's version of the story also says the following: "Under the terms being discussed, Citigroup would agree to absorb losses on assets covered by the agreement up to a certain threshold. The federal government would cover losses beyond that level, people familiar with the matter said." CNBC adds this: The Government will absorb much of the losses for citi if there are losses and Citi would issue preferred stock to the government."

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