U.S. bails out Citi with $20 billion capital, guarantees

Reuters
November 24, 2008

The U.S. government has bailed out Citigroup Inc, agreeing to shoulder most of the potential losses on $306 billion of high-risk assets and inject $20 billion of new capital in its biggest move yet to rescue a bank.

• A d v e r t i s e m e n t

The action marks the latest government effort to contain a widening financial meltdown that has caused the disappearance or bankruptcies of companies including Bear Stearns Cos, Lehman Brothers Holdings Inc and Washington Mutual Inc.

Shares of Citi surged 55 percent to $5.83 in electronic trading before the opening bell in New York. The price of insuring $10 million of Citi bonds through credit-default swaps fell by about half to $257,000 per year.

“Clearly, this will stabilize the (banks) group near term, and the stocks this morning should reflect it,” Oppenheimer & Co analyst Meredith Whitney said. “We are still cautious on the potential future dilution from further prospective capital raises for the group as well as continued higher losses related to credit and asset deflation.”

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