itigroup, U.S. in Talks to Create 'Bad Bank' Citigroup Inc. is nearing agreement with U.S. government officials to create a structure that would house some of the financial giant's risky assets, according to people familiar with the situation. While the discussions remain fluid and might not result in an agreement, talks were progressing Sunday toward creation of what would essentially be a "bad bank." That structure would help Citigroup cleanse its balance sheet of billions of dollars in potentially toxic assets, these people said. The bad bank also might absorb assets from Citigroup's off-balance-sheet entities, which hold $1.23 trillion. Some of those assets are tied to mortgages, and investors have worried such assets could cause heavy losses if they land on the company's balance sheet. Citigroup also has about $2 trillion in loans, securities and other assets on its balance sheet as of Sept. 30. Behind the push is a broad effort to shore up faith in the New York company, which saw its stock price tumble by 60% last week to a 16-year low. Under the terms being discussed, Citigroup would agree to absorb losses on assets covered by the agreement up to a certain threshold. The federal government would cover losses beyond that level, people familiar with the matter said. One person said the new entity is expected to hold about $50 billion of assets.
Citigroup Inc. is nearing agreement with U.S. government officials to create a structure that would house some of the financial giant's risky assets, according to people familiar with the situation.
While the discussions remain fluid and might not result in an agreement, talks were progressing Sunday toward creation of what would essentially be a "bad bank." That structure would help Citigroup cleanse its balance sheet of billions of dollars in potentially toxic assets, these people said.
The bad bank also might absorb assets from Citigroup's off-balance-sheet entities, which hold $1.23 trillion. Some of those assets are tied to mortgages, and investors have worried such assets could cause heavy losses if they land on the company's balance sheet. Citigroup also has about $2 trillion in loans, securities and other assets on its balance sheet as of Sept. 30.
Behind the push is a broad effort to shore up faith in the New York company, which saw its stock price tumble by 60% last week to a 16-year low.
Under the terms being discussed, Citigroup would agree to absorb losses on assets covered by the agreement up to a certain threshold. The federal government would cover losses beyond that level, people familiar with the matter said. One person said the new entity is expected to hold about $50 billion of assets.
Hey, it's only 3 times the Crédit Lyonnais... and it's not government-owned. In the long run, we're all dead. John Maynard Keynes
