WASHINGTON - THE following is the text of a statement on Citigroup Inc released jointly by the US Treasury Department, Federal Reserve and Federal Deposit Insurance Corp on Sunday:
The US government is committed to supporting financial market stability, which is a prerequisite to restoring vigorous economic growth. In support of this commitment, the US government on Sunday entered into an agreement with Citigroup to provide a package of guarantees, liquidity access and capital.
As part of the agreement, Treasury and the Federal Deposit Insurance Corporation will provide 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. As a fee for this arrangement, Citigroup will issue preferred shares to the Treasury and FDIC. In addition and if necessary, the Federal Reserve stands ready to backstop residual risk in the asset pool through a non-recourse loan.
In addition, Treasury will invest US$20 billion in Citigroup from the Troubled Asset Relief Programme in exchange for preferred stock with an 8 per cent dividend to the Treasury. Citigroup will comply with enhanced executive compensation restrictions and implement the FDIC's mortgage modification programme.
With these transactions, the US government is taking the actions necessary to strengthen the financial system and protect US taxpayers and the US economy.
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 following principles guide our efforts: