The U.S. government announced multi-billion dollar backstop for Citigroup. Citigroup, with $2 trillion worth of assets, is the largest U.S. bank by assets.
Too big too fail again?
U.S. Offers Citigroup Sweeping Safety Net
The Treasury Department, Federal Reserve and Federal Deposit Insurance Corp. said last night they will protect Citigroup, one of the nation’s largest banks, against potential losses on a $306 billion pool of troubled assets.
Citigroup would absorb the first $29 billion in any further losses on these assets, which are primarily securities backed by mortgages and commercial real estate loans, with the government stepping in to cover most of the losses beyond that amount. In return, the government is to receive $7 billion in preferred shares in the company.
The government also will invest another $20 billion in Citigroup, on top of the $25 billion infusion of taxpayer dollars already made.
This time, though, the company in jeopardy is truly gigantic. Citigroup is the largest U.S. bank by assets, with $2 trillion on its books. (Source: Washington Post)
On other news, Bloomberg reports Goldman, Morgan Stanley May Want Citigroup:
Goldman, Morgan Stanley May Want Citigroup, CreditSights Says
A purchase of Citigroup Inc. would “significantly” add to Goldman Sachs Group Inc. or Morgan Stanley’s earnings as long as the U.S. government absorbed losses on the embattled bank’s assets, according CreditSights Inc.
Buying Citigroup “would be significantly accretive to Goldman and Morgan Stanley’s earnings as the potential buyer would be acquiring a significant future earnings stream for a relatively low price,” David Hendler, an analyst at CreditSights in New York, wrote in a report yesterday. The buyer “would probably receive government support if it was needed.” (Source: Bloomberg)
Erm… As long as what?