U.S. Gov`t Pledges Bailout to Troubled Citiroup

The U.S. government will protect Citigroup from potential losses on 306 billion dollars worth of high risk assets and provide a bailout of 20 billion dollars, U.S. media said yesterday.

The U.S. banking giant has been teetering on the brink of bankruptcy due to losses stemming from bad debts and the plunge in its stock prices.

The Wall Street Journal said the Federal Reserve Board, the Treasury Department and the Federal Deposit Insurance Corp. in a joint statement called the actions necessary to strengthen the financial system and protect the U.S. economy.

As part of the agreement, the Treasury Department and the deposit insurance company will provide protection against possible losses from an asset pool of approximately 306 billion dollars in loans and securities, including mortgage-related assets.

In addition, the Fed is ready to provide additional loans to the bank if necessary.

Citigroup, which received last month 25 billion dollars from the Troubled Asset Relief Program from the Treasury Department, will get an additional 20 billion dollars in exchange for preferred shares. The Treasury Department will earn an eight-percent dividend.

higgledy@donga.com