US government rescues Citigroup; stocks soar

Nov 24, 2008, 15:20 GMT

Washington - The US government's decision to rescue banking giant Citigroup sent stocks soaring Monday, and President George W Bush said similar decisions to safeguard the financial system would be made again in the future, if required.

Citigroup, which lost more than 60 per cent of its value last week, bounced back 52 per cent Monday after the government agreed to give it 20 billion dollars from the 700-billion-dollar financial rescue plan, in exchange for stock with an 8 per cent dividend to the Treasury Department. The bank will face restrictions on executive pay and other areas under the deal.

The US Treasury, the Federal Reserve and the Federal Deposit Insurance Corporation said in a joint statement late Sunday that they would guarantee Citigroup against massive losses on its 306 billion dollars in mortgage-related assets.

Following a meeting Monday with Treasury Secretary Henry Paulson, Bush said: 'The secretary and I share the concerns of our citizens: Concerns about jobs, concerns about their savings accounts. This is a tough situation for America, but we'll recover from it. And the first step to recovery is to safeguard our financial system.'

Regarding the decision to rescue Citigroup, he said, 'Now, we have made these kind of decisions in the past. We made one last night. And if need be, we're going to make these kind of decisions to safeguard our financial system in the future.'

By 11 am (1600 GMT), the Dow Jones Industrial Average was up 305.61, or 3.80 per cent, to 8,352.03 points. The broader Standard & Poor's 500 Index climbed 34.18, or 4.27 per cent, to 834.21 points. And the Nasdaq Composite Index rose 56.86, or 4.11 per cent, to 1,441.21.

Bush also said that president-elect Barack Obama would be kept informed of all the major financial decisions during the transition period. 'It's important for the American people to know that there is close cooperation,' he said.

Obama and vice-president-elect Joe Biden were to hold a news conference later Monday to unveil the team they've picked to get the economy back on track.