Citigroup Inc. will have more than $300 billion of troubled mortgages and other assets guaranteed by the U.S. government under a federal plan to stabilize the lender after its stock fell 60 percent last week.
Citigroup also will get a $20 billion cash infusion from the Treasury Department, adding to the $25 billion the bank received last month under the Troubled Asset Relief Program. In return for the cash and guarantees, the government will get $27 billion of preferred shares paying an 8 percent dividend.
The Treasury, Federal Reserve and Federal Deposit Insurance Corp. said in a joint statement that the move aims to bolster financial-market stability and restore economic growth. The decision came after New York-based Citigroup’s tumbling share price sparked concern that nervous depositors might pull their money and destabilize the company, which has $2 trillion of assets and operations in more than 100 countries.
“It really was a must-do thing,” said Nader Naeimi, a Sydney-based strategist at AMP Capital Investors, which manages about $85 billion. “If they’d let Citigroup go, that would’ve been disastrous.”
Chief Executive Officer Vikram Pandit, 51, told employees on a Nov. 21 conference call that he doesn’t plan to break up the company. He and Chief Financial Officer Gary Crittenden said they don’t expect to sell the Smith Barney brokerage unit, two people who listened to the call said at the time.
Citigroup’s board, led by Chairman Win Bischoff and independent director Richard Parsons, met the same day to discuss the bank’s options.
Citigroup issued a statement last week saying the company has “a very strong capital and liquidity position and a unique global franchise.”
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