本文发表在 rolia.net 枫下论坛US Feds To Inject $20B Into Citigroup; Lifts Shares
By MAYA JACKSON RANDALL and BRIAN BLACKSTONE
Of DOW JONES NEWSWIRES
WASHINGTON -- U.S. federal regulators Sunday agreed to inject an additional $20 billion into Citigroup Inc. (C) and back up to $306 billion worth of the giant bank's assets in a bid to help stabilize the firm and the broader financial system.
In exchange for the rescue, Citigroup will issue preferred shares to the federal government, adhere to executive pay limits and implement a government program designed to help make home loans more affordable for struggling borrowers.
"The U.S. government is committed to supporting financial market stability, which is a prerequisite to restoring vigorous economic growth," the Treasury Department, Federal Reserve and Federal Deposit Insurance Corp. said in a joint statement.
In a conference call, government officials called the actions a strong statement of support for the financial system.
Under the broad rescue package, the Treasury and the FDIC will provide protection against the possibility of unusually large losses on an asset pool of approximately $306 billion of loans and securities backed by residential and commercial real estate and other such assets, which will remain on Citigroup's balance sheet.
Government officials said the $306 billion pool of assets are largely residential and nonresidential mortgage securities that were perceived by financial markets to have large tail risks
Meanwhile, the Federal Reserve stands ready to backstop residual risk in the asset pool through a non-recourse loan, officials said in their statement.
According to a term sheet officials released Sunday, Citigroup must absorb all losses in its portfolio up to $29 billion in addition to its existing loss reserves. The federal government will absorb 90% of losses above that -- it'll take on the first $5 billion through funds provided in the $700 billion bailout plan Congress approved last month and the next $10 billion would come from the FDIC.
The Fed backstop will only kick in if all of those other resources are exhausted. The Fed's interest rate for that loan, if needed, mirrors the revised terms of its rescue of insurer American International Group. The Fed's Board of Governors approved the program in a unanimous vote.
As a fee for this arrangement, Citigroup will issue $7 billion in preferred shares with an 8% dividend rate to the Treasury and FDIC.
The rescue also calls for the Treasury to invest $20 billion in Citigroup from its $700 billion financial-rescue program, known as the "Troubled Asset Relief Program," in exchange for preferred stock with an 8% dividend to the Treasury. Citigroup, in turn, will need to comply with enhanced executive compensation limits and implement the FDIC's mortgage modification program.
However, top executives at Citigroup were not forced out as part of the deal.
Also, the bank is generally prohibited from paying common stock dividends, in excess of $.01 per share per quarter, for three years, according to a summary of the agreement terms.
"With these transactions, the U.S. government is taking the actions necessary to strengthen the financial system and protect U.S. taxpayers and the U.S. economy," federal officials said in the statement. "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."
Friday proved to be difficult for the giant bank. Its stock collapsed, falling as much as 35% to a new 16-year low. Bank officials met Friday to discuss their options and maintained that the firm has more than enough capital. Even so, some executives started considering selling off entire lines of the giant bank's business or even putting the bank itself on the block.
Meanwhile, the cost of protecting investments in Citigroup debt against default climbed Friday. Investors now have to pay $500,000 a year to get paid $10 million in the event Citigroup defaults. That's up from $430,000 Thursday, but well below the price of protection for debt in Lehman Brothers and Bear Stearns when those banks ran into trouble.
Treasury has already agreed to inject $25 billion in the firm under its broader $250 billion plan to stabilize financial markets by taking equity stakes in potentially thousands of banks.
But investors have grown even more uneasy recently as new data hint at a severe downturn and federal officials warn of a lengthy recession. Investors have also been put off by Treasury's recent announcement earlier this month that it wouldn't move forward with its plan to purchase banks' illiquid assets. Without that asset purchase plan, it means banks are likely stuck holding soured debt on their balance sheets at such a fragile time in the markets.
Citigroup's balance sheet, in particular, includes battered securities and loans that many investors hoped the government would buy.
Government officials said New York Fed President Timothy Geithner, who has been tapped by President-elect Barack Obama to be the next Treasury Secretary, worked with officials on Sunday's Citigroup deal.
(Donna Kardos and David Enrich contributed to this story)更多精彩文章及讨论，请光临枫下论坛 rolia.net
By MAYA JACKSON RANDALL and BRIAN BLACKSTONE
Of DOW JONES NEWSWIRES
WASHINGTON -- U.S. federal regulators Sunday agreed to inject an additional $20 billion into Citigroup Inc. (C) and back up to $306 billion worth of the giant bank's assets in a bid to help stabilize the firm and the broader financial system.
In exchange for the rescue, Citigroup will issue preferred shares to the federal government, adhere to executive pay limits and implement a government program designed to help make home loans more affordable for struggling borrowers.
"The U.S. government is committed to supporting financial market stability, which is a prerequisite to restoring vigorous economic growth," the Treasury Department, Federal Reserve and Federal Deposit Insurance Corp. said in a joint statement.
In a conference call, government officials called the actions a strong statement of support for the financial system.
Under the broad rescue package, the Treasury and the FDIC will provide protection against the possibility of unusually large losses on an asset pool of approximately $306 billion of loans and securities backed by residential and commercial real estate and other such assets, which will remain on Citigroup's balance sheet.
Government officials said the $306 billion pool of assets are largely residential and nonresidential mortgage securities that were perceived by financial markets to have large tail risks
Meanwhile, the Federal Reserve stands ready to backstop residual risk in the asset pool through a non-recourse loan, officials said in their statement.
According to a term sheet officials released Sunday, Citigroup must absorb all losses in its portfolio up to $29 billion in addition to its existing loss reserves. The federal government will absorb 90% of losses above that -- it'll take on the first $5 billion through funds provided in the $700 billion bailout plan Congress approved last month and the next $10 billion would come from the FDIC.
The Fed backstop will only kick in if all of those other resources are exhausted. The Fed's interest rate for that loan, if needed, mirrors the revised terms of its rescue of insurer American International Group. The Fed's Board of Governors approved the program in a unanimous vote.
As a fee for this arrangement, Citigroup will issue $7 billion in preferred shares with an 8% dividend rate to the Treasury and FDIC.
The rescue also calls for the Treasury to invest $20 billion in Citigroup from its $700 billion financial-rescue program, known as the "Troubled Asset Relief Program," in exchange for preferred stock with an 8% dividend to the Treasury. Citigroup, in turn, will need to comply with enhanced executive compensation limits and implement the FDIC's mortgage modification program.
However, top executives at Citigroup were not forced out as part of the deal.
Also, the bank is generally prohibited from paying common stock dividends, in excess of $.01 per share per quarter, for three years, according to a summary of the agreement terms.
"With these transactions, the U.S. government is taking the actions necessary to strengthen the financial system and protect U.S. taxpayers and the U.S. economy," federal officials said in the statement. "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."
Friday proved to be difficult for the giant bank. Its stock collapsed, falling as much as 35% to a new 16-year low. Bank officials met Friday to discuss their options and maintained that the firm has more than enough capital. Even so, some executives started considering selling off entire lines of the giant bank's business or even putting the bank itself on the block.
Meanwhile, the cost of protecting investments in Citigroup debt against default climbed Friday. Investors now have to pay $500,000 a year to get paid $10 million in the event Citigroup defaults. That's up from $430,000 Thursday, but well below the price of protection for debt in Lehman Brothers and Bear Stearns when those banks ran into trouble.
Treasury has already agreed to inject $25 billion in the firm under its broader $250 billion plan to stabilize financial markets by taking equity stakes in potentially thousands of banks.
But investors have grown even more uneasy recently as new data hint at a severe downturn and federal officials warn of a lengthy recession. Investors have also been put off by Treasury's recent announcement earlier this month that it wouldn't move forward with its plan to purchase banks' illiquid assets. Without that asset purchase plan, it means banks are likely stuck holding soured debt on their balance sheets at such a fragile time in the markets.
Citigroup's balance sheet, in particular, includes battered securities and loans that many investors hoped the government would buy.
Government officials said New York Fed President Timothy Geithner, who has been tapped by President-elect Barack Obama to be the next Treasury Secretary, worked with officials on Sunday's Citigroup deal.
(Donna Kardos and David Enrich contributed to this story)更多精彩文章及讨论，请光临枫下论坛 rolia.net