In short: (a) Citi gets another $27 billion on the same terms as the first $25 billion, except that the interest rate is now 8% instead of 5%, and there is a cap on dividends of $0.01 per share per quarter; and (b) the government (Treasury, FDIC, Fed) agrees to absorb 90% of losses above $29 billion on a $306 billion slice of Citi’s assets, made up of residential and commercial mortgage-backed securities. (If triggered, some of that guarantee will be provided as a loan from the Fed.) There is also a warrant to buy up to $2.7 billion worth of common stock (I presume) at a staggeringly silly price of $10.61 per share (Citi closed at $3.77 on Friday).
In addition, there will be no management changes and according to the NYT, “the preferred shares will pay an 8 percent dividend and will slightly erode the value of shares held by investors.” Seems like a pretty sweet deal for Citi and Citi’s shareholders to me. Meanwhile, the government has done absolutely nothing to restructure mortgages our bailout homeowners, whose instability is what’s causing the government to guarantee $270 billion in Citi’s “troubled” assets in the first place. If you really want to get upset, read yesterday’s article in the Times about how Citi got here in the first place.