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US authorities on Sunday agreed on a plan to rescue Citigroup, injecting $20 billion from the TARP programme and providing protection against the possibility of unusually large losses on an asset pool of approximately $306 billion of loans and securities.
Citigroup will therefore comply with enhanced executive compensation restrictions and implement the FDIC's mortgage modification program.
Joint Statement by Treasury, Federal Reserve and the FDIC on Citigroup
The
As part of the agreement, 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 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.
With these transactions, the
We will continue to use all of our resources to preserve the strength of our banking institutions and promote the process of repair and recovery and to manage risks. The following principles guide our efforts:
Ø We will work to support a healthy resumption of credit flows to households and businesses.
Ø We will exercise prudent stewardship of taxpayer resources.
Ø We will carefully circumscribe the involvement of government in the financial sector.
Ø We will bolster the efforts of financial institutions to attract private capital.