Monday, November 24, 2008

Citi Bailout Details

As we detailed less than a week ago, someone was going to save Citi. Not surprisingly, it comes in the form of the U.S. Taxpayer. Per the Federal Reserve (bold mine):

  • Institution absorbs all losses in portfolio up to $29 bn (in addition to existing reserves)
  • Any losses in portfolio in excess of that amount are shared USG (90%) and institution (10%).
USG share will be allocated as follows:
  • UST (via TARP) second loss up to $5 bn;
  • FDIC takes the third loss up to $10 bn;

In return, US Taxpayers receive:

Institution will issue $7 bn of preferred stock with an 8% dividend rate (under terms described below). $4 bn of preferred will be issued to UST. $3 bn will be issued to the FDIC.
Citi shareholders, in return for not getting wiped out, will see their dividend all, but wiped out:

Institution is prohibited from paying common stock dividends, in excess of $.01 per share per quarter, for 3 years without UST/FDIC/FRB consent.
And customer's are already hearing "good news" from Citi in a mass email sent just this morning (hat tip Dom):

Good news! Citibank is participating in the FDIC's Temporary Liquidity Guarantee Program. Through December 31, 2009, all of your non-interest and interest bearing checking deposit account balances are fully guaranteed by the FDIC for the entire amount in your account.


  1. my initial thought upon hearing about Citibank's potential bankrupcy was, Yipee! this will cancel out the small fortune's worth of debt I have stored up on my trusty Citi-card... right?