Wow! The weekend drama ended with a bang: A radical government plan to keep Citi afloat. The plan will back up to $306 billion of loans and certain other assets, all of which will remain on Citi's balance sheet. Citigroup will shoulder losses up to the first $29 billion. Remaining losses will be split between Citigroup and the government, with the bank absorbing 10 percent and the government absorbing 90 percent. The Treasury Department and FDIC and then the Fed are also in line to absorb losses. In exchange, Citigroup will issue $7 billion of preferred stock to government regulators. The government will also buy $20 billion of preferred stock in Citigroup at 8 percent. The big issue  is whether this will work, because, frankly, we're in uncharted territory. People thought the solvency issue had been addressed by the TARP, but clearly it wasn't enough.

For more:
- here's the article from the New York Times

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