Citigroup Gets Bailout
By Alan Stewart Carl | Related entries in Economy
Last night, officials from the Federal Reserve, Treasury Department and Federal Deposit Insurance Corp agreed to bailout financial giant Citigroup by putting an extra $20 billion into the company and by providing up to $306 billion of government backing against large losses on risky mortgages.
These funds will come from the $700 billion in bailout funds authorized by Congress. And the money does come with strings attached.
In exchange for the guarantees, the government will get $7 billion in preferred shares of Citigroup. In addition, Citi said it will issue warrants to the U.S. Treasury and the FDIC for approximately 254 million shares of the company’s common stock at a strike price of $10.61.
As a condition of the rescue, Citigroup is barred from paying quarterly dividends to shareholders of more than 1 cent a share for three years unless the company obtains consent from the three federal agencies. The bank is currently paying a dividend of 16 cents, halved from a 32-cent payout in the previous quarter. The agreement also places restrictions on executive compensation, including bonuses.
Citigroup is also required to help struggling home borrowers by reducing interest rates to a fixed 3% over the next five years, ensuring borrowers aren’t paying more than 38% of their pretax income on mortgages.
This all seems in line with the intended use of the $700 billion in bailout money. Still, it’s hard to read these stories and not feel like a chump for having a responsible mortgage. I’d like to pay 3% interest over the next five years.
This entry was posted on Monday, November 24th, 2008 and is filed under Economy. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.
November 24th, 2008 at 8:55 am
[...] « Citigroup Gets Bailout [...]
November 24th, 2008 at 9:04 am
how come everyone get a bailout and I can’t. I feel like the government could care less about me and the big shots get everything. What about me?
November 24th, 2008 at 9:44 am
Many homeowners made bad decisions and many banks made bad decisions, but the banks are being largely forgiven and the homeowners, does anyone care? You shouldn’t feel like a chump for taking a responsible mortgage, you should be proud that you are responsible. Those banks which aren’t getting killed should be proud that they were responsible. But the reason why we are bailing out banks and not people is that we care more about corporations than people. That’s what America’s history has been for the past 100 years.
November 24th, 2008 at 11:32 am
Where are all the “don’t give a bailout to the auto makers” people?
Lemme see. Poor decision making by the the executives. Check.
Overpaid executives. Check.
Over paid workers. Check.
What the difference? White collar v. blue collar.
Here’s the real difference, though. The Automakers actually MAKE something that is tangible. The finaciers juggle money around so fast no one knows what is real and what is not.
And One jest, it’s most like 30 years that things have gone completely insane
November 24th, 2008 at 2:37 pm
“The agreement also places restrictions on executive compensation, including bonuses”
As a condition for the bailout the top mamangement ought to be forced to resign.
November 24th, 2008 at 4:59 pm
gerryf: it’s simple. The automakers don’t loan money to keep the rest of America’s businesses running. The financial companies do. If credit freezes, we’re all screwed. If GM fails, there will be job losses but the industry will continue. There’s really no comparrison but, if you are concerned, do know that tens of thousands of financial sector workers have lost their jobs this year.
November 24th, 2008 at 5:34 pm
I realize that–my point. albeit exagerated to the nth degree–is that while there has been some minor grumbling in comparison, the financial sector is the group that is at fault for not only their own troubles, but all the other ones–including to a large degree, the auto industry.
The financial industry is the worst case of inbred group think we’ve ever witnessed, and the Nero’s in Washington have been playing fiddle at the dance.
November 28th, 2008 at 11:39 am
[...] thing’s for sure…after that additional $20B for Citigroup earlier in the week, the car companies will have more ammo to say, “And why exactly not [...]