Is really CITI saved?

Uncle Sam Pumps Up Citi

Liz Moyer, 11.24.08, 03:40 AM EST

U.S. guarantees bank against losses on $300 billion of its riskiest assets and injects another $20 billion in capital.

• Citigroup, Inc.

• American Intl Group, Inc.

The federal government stepped in Sunday night to bail out Citigroup and restore confidence in the financial system, promising to protect the banking giant against losses on hundreds of billions of dollars worth of troubled assets.

After a week in which Citi's shares plummeted 60% amid mounting concerns about its viability, the U.S. Treasury and the Federal Deposit Insurance Corp. said they will provide protection against the possibility of "unusually large losses" on an asset pool of approximately $306 billion of loans and securities backed by residential and commercial real estate, which will remain on Citigroup's balance sheet.

The Treasury will also inject another $20 billion in capital into Citigroup (nyse: C - news - people ) through the Troubled Asset Relief Program, receiving preferring stock that will yield 8%.

Citigroup's Frankfurt-listed shares shot up 42.4% to 4.21 euros ($5.30) on Monday morning in Germany. The news also boosted leading European stocks, sending the benchmark Dow Jones EuroStoxx index of 50 leading shares up 2.1%, to 2,210.79 points. "This will bring a positive effect into financials," said Riccardo Barbieri, chief strategist at Bank of America. "Equities will extend their recovery on the back of this plan as it is an important step forward."

The intervention marks yet another reversal for Treasury Secretary Henry Paulson, turning back to an approach similar to his original plan to use government money to shoulder troubled bank assets.

The Treasury will also inject another $20 billion in capital into Citigroup (nyse: C - news - people ) through the Troubled Asset Relief Program, receiving preferring stock that will yield 8%.

Citigroup's Frankfurt-listed shares shot up 42.4% to 4.21 euros ($5.30) on Monday morning in Germany. The news also boosted leading European stocks, sending the benchmark Dow Jones EuroStoxx index of 50 leading shares up 2.1%, to 2,210.79 points. "This will bring a positive effect into financials," said Riccardo Barbieri, chief strategist at Bank of America. "Equities will extend their recovery on the back of this plan as it is an important step forward."

The intervention marks yet another reversal for Treasury Secretary Henry Paulson, turning back to an approach similar to his original plan to use government money to shoulder troubled bank assets.