Citigroup bailed out
Posted on November 24th, 2008 by bile Tags: AMP Capital Investors, bailout, bank, boom bust cycle, car manufacturer bailout, Citigroup Inc., Congress, Federal Deposit Insurance Corp, Federal Reserve System, inflation, Nader Naeimi, New York, New York Stock Exchange, Sydney, U.S. government, United States 1 Comment »Nov. 24 (Bloomberg) — Citigroup Inc. received a U.S. government rescue package that shields the bank from losses on toxic assets and injects $20 billion of capital, bolstering the stock after its 60 percent plunge last week.
The second-biggest U.S. bank by assets surged as much as 72.4 percent in New York trading after the Treasury, Federal Reserve and Federal Deposit Insurance Corp. announced the aid plan in a joint statement. In return for the cash and guarantees, the government will get $27 billion of preferred shares paying an 8 percent dividend.
The regulators stepped in to protect Citigroup from losses on a $306 billion pile of troubled U.S. home loans, commercial mortgages, subprime bonds and corporate loans when the firm’s tumbling share price sparked concern that depositors might pull their money and destabilize the company, which has $2 trillion of assets and operations in more than 100 countries. The $20 billion of new cash comes on top of a $25 billion infusion the bank received last month under the Troubled Asset Relief Program, passed by Congress to shore up the financial industry.
“It really was a must-do thing,” said Nader Naeimi, a Sydney-based strategist at AMP Capital Investors, which manages about $85 billion. “If they’d let Citigroup go, that would’ve been disastrous.”
Citigroup’s stock sank about 80 percent this year and dropped below $5 last week for the first time since 1994. The shares closed last week at $3.77 on the New York Stock Exchange. They gained 65 percent to $6.22 at 11:00 a.m. in NYSE composite trading today, after rising as high as $6.50.
Not a surprise. Just like the coming car manufacturer bailout. Stock markets, as one would expect, are cheering this action on. Some financial stocks are up 30%+.
