Bailout Talks Accelerate for Ailing Citigroup |

Bailout Talks Accelerate for Ailing Citigroup

Billions in Toxic Assets May Be Removed; New Phase for Government Bank Rescue

The federal government was nearing an agreement Sunday night to rescue
Citigroup Inc. by helping to remove billions of dollars in toxic
assets from its balance sheet, people familiar with the talks say.

The agreement, which was still under discussion and could fall apart,
would mark a new phase in government efforts to stabilize U.S. banks
and securities firms. After injecting nearly $300 billion of capital
into financial institutions, federal officials now appear to be
willing to absorb bad assets, on a targeted basis, from specific
institutions.

The talks Sunday centered on the creation of what is sometimes called
a “bad bank” — an outside entity designed to hold some of a financial
firm’s worst assets. That structure would help Citigroup cleanse
itself of billions of dollars in potentially toxic assets, these
people said.

Under the terms being discussed with top Treasury Department and
Federal Reserve officials, Citigroup would agree to absorb losses on
assets covered by the agreement up to a certain threshold, people
familiar with the matter said. The U.S. government would then absorb
any additional losses, these people said. One person said the new
entity is expected to hold about $50 billion of assets.

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