New Citigroup rescue as Obama names eco team
AFP - 18 minutes ago
WASHINGTON (AFP) - - The US government announced Monday a new 20-billion-dollar lifeline for banking giant Citigroup ahead of the unveiling of president-elect Barack Obama's economic team.
The latest help for Citigroup, whose shares collapsed last week due to fears it could follow other US banks into the financial void, follows a previous 25-billion-dollar capital injection from the Treasury.
Also on Monday, Britain was expected to announce plans to slash taxes and boost spending to avert recession.
German Chancellor Angela Merkel said after talks with President Nicolas Sarkoy that France and Germany would not follow suit and warned against any "haste" in drawing up a Europe-wide economic rescue programme.
On global stock markets, Asian shares fell slightly, while European markets soared 3.0-4.0 percent. Traders awaited a positive opening on Wall Street in reaction to the Citigroup rescue after a 6.54-percent surge on Friday.
Obama was set to name Timothy Geithner, the current New York Federal Reserve Bank chief, as his treasury secretary.
Geithner has played a leading role in the financial rescues of the last year and is now expected to take charge of piloting a huge stimulus package planned by Obama to boost the flagging US economy.
Obama was expected to provide some further details of his rescue plans as he announced his economic team , US media said.
The Washington Post reported that Obama and his Democratic allies in Congress were preparing a second program that could total as much as 700 billion dollars over the next two years.
The newspaper said that if approved, the amount would be one of the biggest public spending programs aimed at propping up the economy since President Franklin D. Roosevelt's New Deal.
Obama has championed a second stimulus package and has said it will be one of the first things he signs in office after his inauguration in January. Incumbent George W. Bush has resisted the idea.
For Citigroup, the Treasury Department, Federal Reserve and Federal Deposit Insurance Corporation said in a statement that they had agreed to protect the struggling banking giant against "unusually large losses."
Their measures include giving it 20 billion dollars (19.7 billion euros) from the 700-billion-dollar financial rescue package approved by Congress.
"The US government is taking the actions necessary to strengthen the financial system and protect US taxpayers and the US economy," the three agencies said.
Citigroup was the latest in a series of US financial institutions that have needed rescuing in a credit crisis that stemmed from a collapse of the US real estate market.
The crisis took a severe turn in September when the investment bank Lehman Brothers was allowed to fail and the US government then stepped in to rescue the huge insurance group AIG.
Investment bank Bear Stearns was forced into a merger with JPMorgan Chase.
In another economic stimulus package to be unveiled on Monday, the British government was expected to hit the rich to pay for tax cuts aimed at getting consumers spending again.
Finance minister Alistair Darling on Sunday promised immediate support to every household in the country, with reports suggesting he would cut value-added tax on sales and raise the top rate of income tax.
Elsewhere, Swiss authorities said they may inject more money into Switzerland's largest bank UBS a month after offering it tens of billions of dollars in aid.
"If the situation gets worse, we must ... proceed with a new capital increase," Swiss Federal Banking Commission head Daniel Zuberbuehler was quoted as saying by the weekly Sonntagszeitung, adding that another state intervention "was not excluded."
On Sunday, world leaders vowed decisive action to tackle "one of the most serious economic challenges" ever, as they wrapped up a two-day summit in Peru addressing recent international financial upheaval.
"We will act quickly and decisively to address the impending global economic slowdown," the leaders of the 21-member Asia-Pacific Economic Cooperation forum declared in a statement.
The Asian and Pacific-rim leaders, who included Bush, called for regulatory reform and better corporate governance, among other measures, to counteract a financial meltdown not seen since the Great Depression.
On stock markets, Hong Kong closed down 1.6 percent, Seoul fell 3.3 percent, Shanghai 3.67 percent and Singapore 2.52 percent. Taipei lost 0.25 percent, although Sydney bucked the trend and finished 0.3 percent better off.
Tokyo was closed for a public holiday.
In early morning deals, London jumped 4.37 percent, Frankfurt won 3.25 percent and Paris gained 4.10 percent.
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A man walks inside a branch of Citibank at the banking giant's world headquarters in New York. The US government announced a new 20-billion-dollar lifeline for banking giant Citigroup ahead of the unveiling of president-elect Barack Obama's economic team.
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