Charlie Gasparino is reporting that the latest talk from Capitol Hill is that the government is considering purchasing equity of Citi. He noted that the situation remains very fluid, and may include a purchase of illiquid assets. Treasury is apparently talking to Capitol Hill lawmakers about the deal.
The New York Times star reporter Eric Dash and Gretchen Morgenson reported this afternoon that the bailout could take the form of some kind of government backstop for Citi’s assets. To us this still sounds like a kind of asset purchase program, although the Times spins it differently.
Here’s Dash and Morgenson:
Under the proposal, the government would shoulder losses at Citigroup if those losses exceeded certain levels, according to these people, who spoke on the condition that they not be identified because the plan was still under discussion.
If the government should have to take on the bigger losses, it would receive a stake in Citigroup. The banking giant has been brought to its knees by gaping losses on mortgage-related investments.
If approved, the plan could serve as a model for other banks, heralding another shift in the government’s morphing financial rescue. The Treasury Department initially proposed buying troubled assets from banks but then reversed course and began injecting capital directly into financial institutions.
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