Citigroup: U.S. Government Bailout Arrives

Uncle Sam will inject capital and backstop troubled assets.

By SHARE

Ok, here were go (from the WSJ):

1) Treasury agrees to inject $20 billion at 8 percent interest.

2)  The government agrees to backstop a $300 billion pool of assets, including MBS. "Citigroup must absorb the first $37 billion to $40 billion in losses from these assets. If losses extend beyond that level, Treasury will absorb the next $5 billion in losses, followed by the FDIC taking on the next $10 billion in losses. Any losses on these assets beyond that level would be taken by the Fed."

3) Citigroup would try to modify troubles mortgages in that pool as the FDIC has done with IndyMac.

Me: I am guessing the market will look at this as a positive tomorrow. It looks like we going the "all of the above" route -- capital injection, de facto asset cleansing ...

You Might Also Like