US government agrees to rescue Citigroup (Lead)

November 24th, 2008 - 2:35 pm ICT by IANS  

Washington, Nov 24 (DPA) The US government has said that it will move to save ailing bank Citigroup by guaranteeing it against huge losses in the midst of the global financial crisis brought on by banks crippled by bad loans.In a joint statement, the US Treasury, the Federal Reserve and the Federal Deposit Insurance Corporation said late Sunday that they would guarantee Citigroup against massive losses on its $306 billion in mortgage-related assets. In return, the bank will grant the government shares of stock.

The government will also give Citigroup $20 billion from the $700-billion financial rescue plan in exchange for stock with an eight percent dividend to the Treasury Department. The bank will also face restrictions on executive pay and other areas under the deal.

The hard-hit bank lost 60 percent of its value last week and it was forced to dodge rumours it planned to sell off large parts of its business.

The largest US bank by assets has experienced four quarters of losses that amount to more than $20 billion. Citigroup has cut more than 75,000 jobs, including 50,000 positions that were chopped just last week.

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