Government announces another taxpayer funded bailout...this time it's Citigroup, and the gov't will take a $20 billion dollar stake in the firm
WASHINGTON (AP) — 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 stocks 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.
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.
In addition, Treasury and the FDIC will guarantee against the "possibility of unusually large losses" on up to $306 billion of risky loans and securities backed by commercial and residential mortgages.