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WASHINGTON, Nov 23, 2008 (AFP) - The US government said late Sunday it will protect banking giant Citigroup against "unusually large losses" and give it US$20 billion from a financial rescue package approved by Congress.
The announcement came after the Treasury Department, Federal Reserve and Federal Deposit Insurance Corporation reached an agreement with Citigroup to provide a package of guarantees to the struggling banking giant.
In a joint statement issued after the talks, the three agencies said they will provide Citigroup "protection against the possibility of unusually large losses on an asset pool of approximately US$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."
In addition, the Treasury Department will invest US$20 billion in Citigroup from the Troubled Asset Relief Program, a 700-billion-dollar package approved by Congress earlier this year to soften the banking crisis, in exchange for preferred stock with an eight-percent dividend to the Treasury, officials said.
Citigroup, on its part, has agreed to comply with unspecified "enhanced executive compensation restrictions" and implement the FDIC's mortgage modification program.
No other details have been made public thus far.
"With these transactions, the US government is taking the actions necessary to strengthen the financial system and protect US taxpayers and the US economy," the three agencies said. "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."
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