Rescue Plan Approved to Save ‘the Citi’

November 24, 2008

CitigroupNew York (ChattahBox) — Citigroup has witnessed the worst week in the bank’s history. Citi officials had been busy drawing up plans to save a repeat telecast of last week’s happening’s in future. They were trying out every possible move that may smooth out the market and they could get some backing either from the government or big investors. Finally, the company will have $306 billion of troubled mortgages and toxic assets guaranteed by the US government under a federal plan.

Citigroup Inc and the US government officials were working late night on Sunday to draw up an agreement that would remove the toxic ‘bad assets’ from the Citigroup’s balance sheets. The Treasury Department and the Federal Reserve have been carrying out discussions to draw a strategic business plan that could minimize the losses in order to stabilize the company. The new bail out plan will hopefully stabilize the bank after its stocks fell more than 60 percent at the NYSE.

One of the easiest options for the government was the bail out plan with its cash injection strategy. It would stabilize the company easily but another option was also being weighed by the Federal regulators of taking out the risky assets from the company’s balance sheets. It remained unclear how the second option can be structured to give the company more breathing room and put it in a better position to raise the capital. It is now agreed that the bail out plan will include $20 billion capital infusion and guarantee for $306 billion of troubled assets.

Citigroup is one of the world’s best known banks with its operations in more than 106 countries that provide services to more than 200 million customers. According to the ongoing talks between the government officials and the company executives, the company would agree to absorb losses to a set amount, on the basis of pool of assets, and the remaining losses would be absorbed by the government.

Such an agreement signed between the Citigroup and the government, marks the beginning of a new phase in federal efforts to stabilise the financial markets. It means that the government would be willing to take on some bad assets from some of the specific institutions on targeted basis.


Comments

2 Responses to “Rescue Plan Approved to Save ‘the Citi’”

  1. Ron Towns on November 24th, 2008 6:11 pm

    Does anyone else feel like these bailouts are rash and feeble? The government needs a long-term plan, rather than trying to jump-start matters. They need to set a goal and see their idea through successfully!

    I think another vital note from this bailout is that we now see the magnitude of this recession. We all should take the necessary steps to recession-proof our lives. In order to do so, I think a realistic estimate of the amount of money we need to cut back on is relevant. Additionally, we all should have a clear vision of our altered future- many people are still living as if we’re in the .com boom of the 90’s! Here’s a great resource I found helpful when reorganizing my future: http://www.thevisionboardkit.com. This kit actually outlines how to create a vision of your goals and dreams and explains how to execute them with success.

  2. Chat on December 15th, 2008 9:49 pm

    nice thank you very much for this article.

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