The US government has agreed to provide a mixture of extra capital, guarantees and loans to Citigroup. The multi-faceted package includes the following elements:

• The provision of $20bn in capital in return for preference shares with an 8% coupon.
• The provision of a guarantee and funding in connection with a $306bn pool of mortgage assets that will continue to be held by Citi. The bank will absorb the first $29bn loss on the pool. Thereafter, any losses will be split with the government taking 90% and Citi taking 10%.
• The second $5bn loss will be absorbed by the Treasury; the third $10bn loss will be absorbed by the FDIC. The pool will be financed by a non-recourse loan from the Federal Reserve, so the central bank will face any further losses.
• Citi will issue a further $7bn in preference shares to the US government. It will pay an interest rate of 300 basis points over the OIS rate for its loan.
• Citi will issue the government with $2.7bn of warrants with a strike price of $10.61, exercisable over 10 years.
• The bank will be need government approval to pay quarterly dividends in excess of $0.01 a share for three years. One factor in determining approval will be its ability to issue common equity of “appropriate size”.
• Citi will have to gain Treasury approval for its executive compensation plan, which will have to be designed to reward long-term performance.