The U.S. government to rescue Citigroup

The U.S. government announced a plan to rescue the U.S. bank Citigroup, agreeing to guarantee the most potential loss of a portfolio of 306 billion dollars of risky assets, including real estate.

The plan announced Sunday evening is currently the largest rescue of a bank led by the U.S. Treasury last attempt to date to support a financial sector crisis.

The government will also inject $ 20 billion of capital into Citigroup, the second U.S. bank by the amount of its assets, in addition to the 25 billion already provided to the bank earlier in the plan of using 700 billion sector support Financial.
The government will receive Citigroup shares with a preferential dividend 8%, higher than 5% paid by dozens of U.S. banks benefit from the plan public U.S. 700 billion.

The bank will not change its direction or replace its CEO Vikram Pandit, but she accepted restrictions on the salaries of its leaders and try to change problem real estate assets in the portfolio of 306 billion dollars, while the Government seeks to prevent seizures of homes.

Citigroup may also not pay a dividend of more than one cent per share per quarter for three years without the agreement of the Department of Treasury. The quarterly dividend paid by Citigroup is currently 16 cents.

Citigroup is the most international of U.S. banks, in over 100 countries. Many analysts believed that the establishment was too big to fail, thus creating a global financial earthquake.

PLAN A MODEL?

The chairman of the Federal Reserve of New York Timothy Geithner, to be chosen in the day as successor to Henry Paulson, also closely involved in the implementation of the plan.

Citigroup, hit hit by the credit crunch, finished down 20% Friday at 3.77 dollars in New York Stock Exchange and has lost 60% over the last week alone.

Citigroup has agreed to absorb the first $ 29 billion of losses on a portfolio of 306 billion, 10% of additional losses for a total exposure of 56.7 billion dollars.

The U.S. Treasury could ultimately absorb $ 5 billion loss, the Federal Deposit Insurance Corp.. (FDIC) 10 billion dollars and the U.S. Federal Reserve the rest.

In detail, the Treasury will receive $ 24 billion of preferred shares Citigroup and the FDIC for $ 3 billion. Of the $ 27 billion of shares issued by Citi, 7 billion used to settle a guarantee for the government.

The rescue plan could serve as a model to help other banks in the world, faced with growing losses due to the credit crisis and the strong global economic slowdown.

The credit losses for banks, concentrated initially in assets linked to mortgages for individuals, currently spread into new compartments such as credit cards or commercial real estate.

"The market wants assurances regarding the losses of Citigroup, said Blake Howells, head of research activities at Becker Capital Management in Portland, Oregon.

"It seems huge in its size and scope," the judge later Tony Morriss at ANZ Bank in Sydney.

The main reason behind the rescue of Citigroup is to restore confidence in the financial system and major financial institutions, reported Monday on their side of the U.S. government responsible.

The Federal Reserve Chairman Ben Bernanke and Treasury Secretary Henry Paulson have worked with leaders throughout the weekend to set up the rescue plan, these officials have indicated to the press early Monday morning.

The Treasury said the Fed stood ready to provide additional safeguards, possibly in the form of a loan.

The future U.S. stock indexes rose Monday morning after the announcement of the rescue plan. Daily Finance and Investment Tips / Make Money by Learning