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Navigation Primary Navigation Home Singapore Asia Pacific World Business Entertainment Sports Technology Top Stories Most Popular Secondary Navigation Search Search: US govt vows to protect Citigroup from 'large losses' AFP - 1 hour 5 minutes ago WASHINGTON (AFP) - - The US government has vowed to protect struggling banking giant Citigroup against "unusually large losses" and give it 20 billion dollars from a financial rescue package approved by Congress. The announcement came after the Treasury Department, Federal Reserve and Federal Deposit Insurance Corporation reached an agreement with Citigroup to provide a package of guarantees to the struggling banking giant. In a joint statement issued after the talks, the three agencies said on Sunday they will provide Citigroup "protection against the possibility of unusually large losses on an asset pool of approximately 306 billion dollars of loans and securities backed by residential and commercial real estate and other such assets, which will remain on Citigroup's balance sheet." In addition, the Treasury Department will invest 20 billion dollars in Citigroup from the Troubled Asset Relief Program, a 700-billion-dollar package approved by Congress earlier this year to soften the banking crisis, in exchange for preferred stock with an eight-percent dividend to the Treasury, officials said. Citigroup, on its part, has agreed to comply with unspecified "enhanced executive compensation restrictions" and implement the FDIC's mortgage modification program. No other details have been made public thus far. "With these transactions, 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. "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." The deal had been expected on Wall Street on Friday when Citigroup shares were in free fall, with investors skeptical about the bank's ability to recover without outside help. Shares of Citigroup, a component of the blue-chip Dow Jones Industrial Average, have tumbled more than 70 percent since the start of the year, with the bank hit by hefty writeoffs linked to the US real estate crisis. Stock prices for the New York City-based company closed at 3.77 dollars on Friday, their lowest level in years. Last Monday, the bank announced it was slashing a near-record 50,000 jobs worldwide to cope with the global financial crisis and heavy losses. At its peak last year, the company employed 375,000 people. Last month, Citi reported a third-quarter loss of 2.8 billion dollars, its fourth straight quarter in the red. The troubled bank is saddled with billions of dollars in losses tied to mortgage investments that lost value in the collapse of the US real estate market and the credit squeeze that erupted last year. But Citi operates in over 100 countries and, with more than two trillion dollars in assets, is widely viewed, both in Washington and on Wall Street, as too big to be allowed to fail. The US Treasury Department used similar justification when it bailed out insurance giant American International Group Inc (AIG) in late September. The ailing bank was among the nine big US banks that agreed last month to give the US government equity stakes in exchange for a combined 125 billion dollars under a 700 billion dollar financial sector rescue plan. Citi got a 25 billion dollar injection. Since last year Citi has raised more than 50 billion dollars to shore up its balance sheet, reduced its investment portfolio by more than 100 billion dollars, reorganized activities and sold several businesses, such as CitiStreet, CitiCapital, BPO in India and a retail bank in Germany. Details of the rescue remained murky late Sunday, although The New York Times said that "if approved, the plan could serve as a model for other banks, heralding another shift in the government's morphing financial rescue." Email Story IM Story Printable View Blog This Recommend this article Average (0 votes) Sign in to recommend this article » Most Recommended Stories » Enlarge Photo A branch of Citibank at the banking giant's world headquarters in New York. The US government has said it will protect the bank against "unusually large losses" and give it US$20 billion from a financial rescue package approved by Congress. Most Popular – Top Stories Viewed Stricken German public bank KfW expects further losses Michael Jackson settles court case: spokeswoman Over 200 narwhal trapped in Canadian ice Slump in Europe spreads wider Japan scientists eye made-to-order bones View Complete List » Search: Home Singapore Asia Pacific World Business Entertainment Sports Technology Top Stories Most Popular

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