Under the agreement, Citigroup will absorb up to $42B of losses on a $312B pool of loans. The FDIC will absorb losses beyond that. Citigroup has granted the FDIC $12B in preferred stock and warrants to compensate the FDIC for bearing this risk. In consultation with the President, the Secretary of the Treasury on the recommendation of the Federal Reserve and FDIC determined that open bank assistance was necessary to avoid serious adverse effects on economic conditions and financial stability.<\/p>\n
This is so typical of this nightmarish crisis we are in. Wachovia closed Friday at 10, and now it is pricing near 2. Because of the mess of what is really on these financial institutions balance sheets, no one knows what they are actually worth. Why would banks want to lend other banks when a bank like Wachovia can have this occur so quickly? How do they know that the bank they are lending to is not another Wachovia–KSH?<\/i><\/p>\n