Citigroup, US in talks for potential bailout: reports

WASHINGTON: US authorities are considering a rescue plan for banking giant Citigroup, according to US news reports Sunday, after a 50 per cent plunge in its stock value last week led executives to consider selling all or parts of the company.

Executives at the bank, once the world's largest, held weekend talks with US Federal Reserve and Treasury Department officials, the Wall Street Journal reported on its website.

"Talks were progressing Sunday toward creation of what would essentially be a 'bad bank'," the Journal said, citing people familiar with the talks.

The new entity would hold about 50 billion dollars of assets and would help the bank "cleanse its balance sheet of billions of dollars in potentially toxic assets," sources told the paper.

Operating in over 100 countries and with more than two trillion dollars in assets, "Citigroup is widely viewed, both in Washington and on Wall Street, as too big to be allowed to fail," The New York Times reported meanwhile.

The US Treasury Department used similar justification when it bailed out insurance giant American International Group Inc (AIG) in late September.

Citigroup, a component of the blue-chip Dow Jones Industrial Average, has tumbled more than 70 percent since the start of the year, with the bank hit by hefty writeoffs linked to the US real estate crisis. Stock prices for the New York City-based company closed at 4.71 dollars on Thursday, their lowest level in years.

Last Monday, the bank announced it was slashing a near-record 50,000 jobs worldwide to cope with the global financial crisis and heavy losses. At its peak last year, the company employed 375,000 people.

"Under the proposal, the government would shoulder losses at Citigroup if those losses exceeded certain levels," The New York Times said. In that case, the government would receive a stake in Citigroup, the paper said, citing people "briefed on the plan."

Details of the rescue remained murky late Sunday, although The New York Times said that "if approved, the plan could serve as a model for other banks, heralding another shift in the government's morphing financial rescue."