What is Citi getting?
Specifically, the government will back a $306 billion pool of troubled loans and securities largely related to the foundering residential and commercial real estate markets. After Citi absorbs the first $29 billion in losses on these securities, the government first the Treasury Department and then the Federal Deposit Insurance Corporation (FDIC) will step in and bear 90% of any further losses. In return, the government gets up to $7 billion in preferred Citi stock and the right to buy more shares at $10.61 not a bargain these days, with Citi trading in the single digits, but perhaps worth more down the road. On top of that, $20 billion from the Treasury’s Troubled Asset Relief Program (TARP) will be injected into the company in exchange for preferred shares that come with an 8% dividend. 2. Didn’t the government already rescue Citigroup? True, this is not the first government handout. On Oct. 13, Treasury told Citi and eight other large banks that it would be buying billions of dollar
