Banking News 20billion Government Bail Out For Citigroup 2547
$20billion Government bail-out for Citigroup
24 November 2008 / by Rachel Mason
In return for the massive bail-out and multi-billion dollar guarantee, the US Government will get $27billion of preferred shares at an eight per cent dividend.
According to reports, US treasury secretary Henry Paulson, and Federal Reserve chairman Ben Bernanke, worked with officials throughout the weekend on the lifeline which they argue is necessary to try and restore confidence in the global financial system and in US financial intuitions.
In a statement issued last night and reported in the Guardian today, the US Government said: “With these transactions, the US government is taking the actions necessary to strengthen the financial system and protect US taxpayers and the US economy.
“We will continue to use all of our resources to preserve the strength of our banking institutions, and promote the process of repair and recovery and to manage risks.”
The $20billion cash injection is the second bail-out Citigroup has received in as many months; in October, it received £25billion as part of the US Government’s Troubled Asset Relief Program.
Citigroup, which was the world’s most valuable bank earlier this year, is now only the fifth-biggest in the US. Two years ago it was worth about $250 billion; it ended last week with a market value of $20.5 billion following a 60 per cent drop in its share price.
Despite the problems the bank is facing, including having to slash 20 per cent of its workforce, chief executive officer Vikram Pandit remained optimistic at a company meeting last week.
He told staff that the bank has “a very strong capital and liquidity position and a unique global franchise,” and said there were no plans to break up the company, dismissing reports it might sell its wealth management arm to Smith Barney.
© Fair Investment Company Ltd