WASHINGTON – Federal regulators this weekend agreed to provide Citigroup with additional access to capital to protect it against losses from $306 billion worth of troubled assets, mostly loans and securities tied to the housing market.
Under the plan, Citigroup will absorb the first $29 billion worth of losses and the government will cover the others. The government will inject $20 billion in capital in the company and in return will receive additional preferred shares.
As part of the Troubled Asset Relief Program, the government already pumped $25 billion into Citigroup.
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In return, the company agreed to limit executive compensation and to implement an FDIC program to provide relief to homeowners in danger of losing their homes.
The Treasury Department, the Federal Reserve and FDIC issued a statement saying the action was "necessary to strengthen the financial system and protect U.S. taxpayers and the U.S. economy."
The agreement was ironed out in around-the-clock negotiations over the weekend, and one of the leaders of the talks was New York Federal Reserve Bank President Timothy Geithner, whom President-Elect Barack Obama is expected to name the new secretary of the treasury later today.
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