The US government has announced to rescue the ailing bank Citigroup by injecting fresh capital into the troubled financial giant. The Citigroup Inc has been suffering huge losses owing to global financial crisis. Under the rescue plan, the US Treasury, the Federal Reserve and the Federal Deposit Insurance Corporation will guarantee Citigroup against massive losses on its $306 billion in mortgage-related assets. According to reports, Citigroup will also be given 20 billion from the $700-billion financial rescue plan in exchange for stock with an eight percent dividend to the Treasury Department.

 

The rescue plan would essentially put the government in the position of insuring a slice of Citigroup's balance sheet. In exchange for that protection, Citigroup will give the government warrants to buy shares in the company. Last week, the bank lost 60 percent of its value. The market was abuzz with the news that the bank might even sell off large parts of its business. The ailing condition of the bank forced it to cut more than 75,000 jobs including 50,000 positions over the past one week.

 

The job slashing measures were undertaken after the huge losses the Citigroup suffered in the last four straight quarters. It has lost more than $20bn in the past year because of the global financial crisis. Now with US government assuring to rescue the bank, it is expected that the financial institute will at least leave the idea of shutting down. The success of the rescue plan is also likely to bring stability to the entire financial system. However, the bank will face restrictions on executive pay and other areas under the deal.