Huge bail out of Citigroup is underway. According to the New York Times, “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.”

Citigroup has over $2 trillion in assets and has operations in over 100 countries. It is seen as too big to be allowed to fail.

Robert Reich, writing on his blog, says, “This is not a particularly good deal for American taxpayers, but it is a marvelous deal for Citi. In return for all the cash and guarantees they are giving away, taxpayers will get only $27 billion of preferred shares paying an 8 percent dividend. No other strings are attached. The senior executives of Citi, including those who have served at the highest levels in the US government, have done their jobs exceedingly well. The American public, including the media, have not the slightest clue what just happened.

“Meanwhile, more than a million workers in the automobile industry, along with six million mortgagees, and a millions of Americans who depend on small businesses and retailers for paychecks, are getting nothing at all.”

Excerpts from NYT:

• Citigroup will shoulder losses on the first $29 billion of that portfolio. Any remaining losses will be split between Citigroup and the government, with the bank absorbing 10 percent and the government absorbing 90 percent. The Treasury Department will use its bailout fund to assume up to $5 billion of losses. If necessary, the Federal Deposit Insurance Corporation will bear the next $10 billion of losses. Beyond that, the Federal Reserve will guarantee any additional losses.
• In exchange, Citigroup will issue $7 billion of preferred stock to government regulators. In addition, the government is buying $20 billion of preferred stock in Citigroup. The preferred shares will pay an 8 percent dividend and will slightly erode the value of shares held by investors.
• Citigroup will effectively halt dividend payments for the next three years and will also agree to certain executive compensation restrictions, which will be reviewed by regulators. It will also put in place the F.D.I.C.’s loan modification plan, which is similar to one it recently announced.
• Once the nation’s largest and mightiest financial company, Citigroup lost half its value in the stock market last week as the bank confronted a crisis of confidence. …Citigroup’s shares have been hit particularly hard. A year ago they were trading at about $30; on Friday they closed at $3.77.

Hendrik Hertzberg of The New Yorker says with Hillary as Secretary of State, the new administration will have a great team in place that, he is predicting, will achieve a region changing Palestinian / Israel deal. Hertzberg says everyone already knows what a Palestinian / Israel deal would look like. He says, “It’s a question of having the political strength and exerting the will to make it happen.”

Hertzberg writes, “The team of Barack ‘Grandpa Was a Muslim’ Obama, Hillary ‘I’m a Clinton’ Clinton, and Rahm ‘Israel’ Emanuel (that’s his real middle name! and he was a volunteer with the I.D.F. during the 1991 Gulf War!), with Joe Biden and Bill Clinton pitching in as necessary, would put the new Administration in an extremely powerful position to apply the kind of pressure that would give Israeli politicians the political cover they need to reach a settlement with the Palestinians.”

In a recent interview, the lame duck prime minister of Israel, Ehud Olmert, said, “We must reach an agreement with the Palestinians, meaning a withdrawal from nearly all, if not all, of the [occupied] territories. Some percentage of these territories would remain in our hands, but we must give the Palestinians the same percentage [of territory elsewhere]—without this, there will be no peace.”

Olmert said the territory given to the Palestinians must include Jerusalem—”with special arrangements made for the Temple Mount and the holy/historical sites.” Olmert said, “This decision is difficult, awful, a decision that contradicts our natural instincts, our deepest yearnings, our collective memories, and the prayers of the nation of Israel for the past two thousand years. … I was the first person who wanted to maintain Israeli control over the entire city. I confess. I’m not trying to retroactively justify what I’ve done for the past thirty-five years. For a significant portion of those years I wasn’t ready to contemplate the depth of this reality.”