Citigroup Federal bailout: FDIC to implement procedures similar to IndyMac

Citigroup is set to receive a huge rescue bailout from the US Federal Government in a bid to shore up the banking giant after shares tumbled further last week. The plan was announced by the Feds on Sunday.

The Citigroup Federal bailout has two main features, First, the Federal Deposit Insurance Corporation (FDIC) and the US Treasury will backstop various losses against more than $300 billion in troubled assets, Second, The Treasury will invest another £20 billion into Citigroup, the bank has already had $25 billion pumped into it as part of the Federal Governments $700 billion bailout package.

The US government will receive $7 billion compensation for the loan guarantees, $20 billion for its direct investment and another batch of preferred shares. The Feds will also have the right to buy the value of $2.7 billion in shares of Citigroup in the future. The dividend rate on the shares will be 8 percent payable by Citigroup.

Citigroup will also have to use similar procedures that were implemented by the FDIC on IndyMac to adjust mortgages for troubled borrowers.

Citigroup shares fell lower than $4 on Friday’s close of trading, shares in the bank have fallen 87 percent this year.

Source: moneycnn