“Treasury and the Federal Deposit Insurance Corporation will provide protection against the possibility of unusually large losses on an asset pool of approximately $306 billion of loans and securities backed by residential and commercial real estate and other such assets, which will remain on Citigroup’s balance sheet. As a fee for this arrangement, Citigroup will issue preferred shares to the Treasury and FDIC. In addition and if necessary, the Federal Reserve stands ready to backstop residual risk in the asset pool through a non-recourse loan.
In addition, Treasury will invest $20 billion in Citigroup from the Troubled Asset Relief Program in exchange for [$27 billion of] preferred stock with an 8% dividend to the Treasury. Citigroup will comply with enhanced executive compensation restrictions and implement the FDIC’s mortgage modification program.”
The US is guaranteeing $306 billion on bad investments (So much for Capitalism without failure). For Citi, its a great deal — but its a terrible one for taxpayers.
The dividend payment has been restricted to one cent per quarter for 3 years. Can someone explain why even a penny is allowed?
Where is the “Protection” for the taxpayers? Where are the clawbacks? How about going after the idiots that bought a third of a trillion dollars worth of junk, and then got paid large on it? Where is the sense of outrage and justice?
At what point do taxpayers demand that the people responsible for creating this mess must pay their pound of flesh?
Sources: Joint Statement by Treasury, Federal Reserve, and the FDIC on Citigroup http://www.federalreserve.gov/newsevents/press/bcreg/20081123a.htm
Citigroup Gets Government Guarantees on $306 Billion of Assets Bradley Keoun Bloomberg, Nov. 24 2008 http://www.bloomberg.com/apps/news?pid=20601087&sid=aBdUcxoRPkp4&r
U.S. Approves Plan to Help Citigroup Weather Losses ERIC DASH NYT, November 23, 2008 http://www.nytimes.com/2008/11/24/business/24citibank.html
U.S. Agrees to Rescue Struggling Citigroup Plan Injects $20 Billion in Fresh Capital, Guarantees $306 Billion in Toxic Assets DAVID ENRICH, CARRICK MOLLENKAMP, MATTHIAS RIEKER, DAMIAN PALETTA and JON HILSENRATH WSJ, NOVEMBER 24, 2008 http://online.wsj.com/article/SB122747680752551447.html
Originally published at The Big Picture blog and reproduced here with the author’s permission.