Citigroup Bailout

(11/24/2008)

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Summary: Citigroup, the largest US bank, has been hit the hardest among US banks by the financial crisis. On November 24th, Federal regulators approved a radical plan to stabilize Citigroup in an arrangement in which the government could soak up billions of dollars in losses at the struggling bank. The complex plan calls for the government to back about $306 billion in loans and securities and directly invest about $20 billion in the company. The plan, emerging after a harrowing week in the financial markets, is the government’s third effort in three months to contain the deepening economic crisis and may set the precedent for other multibillion-dollar financial rescues. The plan could herald yet another shift in the government’s financial rescue. The Treasury Department first proposed buying troubled assets from banks but then reversed course and began injecting capital directly into financial institutions. Neither plan, however, restored investors’ confidence for long. This bailout has caused many to demand explanation as to which institutions are to be bailed out by the government, and which are not.

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