Washington: November 24, 2008, IR Summary/NYT - Every effort is being made to save Citigroup from being collapsed by Federal regulators, who have approved a radical plan to stabilize Citigroup under which the government could soak up billions of dollars in losses at the struggling bank.

Under a proposed agreement, Citigroup and regulators are likely to back up to $306 billion of largely residential and commercial real estate loans and certain other assets, which will remain on the bank’s balance sheet. Citigroup will shoulder losses on the first $29 billion of that portfolio.

The complex plan calls for the government to back about $306 billion in loans and securities and directly invest about $20 billion in the company. The plan, emerging after a harrowing week in the financial markets, is the government’s third effort in three months to contain the deepening economic crisis and may set the precedent for other multibillion-dollar financial rescues.

Citigroup executives presented a plan to federal officials on Friday evening after a weeklong plunge in the company’s share price threatened to engulf other big banks. In tense, round-the-clock negotiations that stretched until almost midnight on Sunday, it became clear that the crisis of confidence had to be defused now or the financial markets could plunge further.

Whether this latest rescue plan will help calm the markets is uncertain, given the stress in the financial system caused by losses at Citigroup and other banks. Each previous government effort initially seemed to reassure investors, leading to optimism that the banking system had steadied. But those hopes faded as the economic outlook worsened, raising worries that more bank loans were turning sour.

President-elect Barack Obama was also working over the weekend to shore up confidence in the rapidly faltering economy. Mr. Obama signaled that he would pursue a far more ambitious plan of spending and tax cuts than he had outlined during his campaign and planned to announce his economic team on Monday.

Some Democrats in Congress, meantime, were calling for the government to spend as much as $700 billion to stimulate the economy over the next two years. Federal Reserve Chairman Ben Bernanke was involved during the discussions.

Mr. Obama’s expected choice for Treasury secretary, Timothy F. Geithner, the president of the Federal Reserve Bank of New York, played a crucial role in the negotiations on Friday but took a less active role once news of his appointment was circulated. While the initial focus of government officials was to help the embattled company, they may also seek to draw up an industrywide plan that could help other banks.

The plan could herald another shift in the government’s financial rescue. The Treasury Department first proposed buying troubled assets from banks but then reversed course and began injecting capital directly into financial institutions. Neither plan, however, restored investors’ confidence for long.

“By intervening, they are giving the market some heart to temporarily stave off some fear — but you can only push that so much,” said Charles R. Geisst, a financial historian and professor at Manhattan College.

Banking industry officials said the decision to support Citigroup, while necessary, could draw a firestorm of criticism from smaller institutions that were not big enough to be saved. More