Citibank Bailout With $300 Billion By Federal Government Saves Citigroup From Bankruptcy Filing

by Trendy

The US government has decided to bailout Citigroup with a $300 billion aid package. Citigroup’s share took a huge hit last week and reached price levels not seen in the last two decades. Here are more details on the Citigroup Bailout news from CNN Money :

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.

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