Monday November 24, 1:51 am ET
By Jeannine Aversa, AP Economics Writer
Government unveils plan to rescue Citigroup, including taking $20 billion stake in the firm
WASHINGTON (AP) — The government unveiled a bold plan Sunday to rescue troubled Citigroup (C), including taking a $20 billion stake in the firm as well as guaranteeing hundreds of billions of dollars in risky assets.
The action, announced jointly by the Treasury Department, the Federal Reserve and the Federal Deposit Insurance Corp., is aimed at shoring up a huge financial institution whose collapse would wreak havoc on the already crippled financial system and the U.S. economy.
The sweeping plan is geared to stemming a crisis of confidence in the company, whose stock has been hammered in the past week on worries about its financial health.
“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,” the three agencies said in a statement issued late Sunday night. “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 move is the latest in a string of high-profile government bailout efforts. The Fed in March provided financial backing to JPMorgan Chase’s (JPM) buyout of ailing Bear Stearns (BSC). Six months later, the government was forced to take over mortgage giants Fannie Mae (FNM) and Freddie Mac (FRE) and throw a financial lifeline — which was recently rejiggered — to insurer American International Group (AIG).
Critics worry the actions could put billions of taxpayers’ dollars in jeopardy and encourage financial companies to take excessive risk on the belief that the government will bail them out of their messes.