Feds Could Absorb Citi's (C) Toxic Assets -WSJ

According to reports from The Wall Street Journal, government officials are designing a plan to rescue embattled bank Citigroup (NYSE: C).

Citing sources familiar with the talks, regulators and Citi are still ironing out the details tonight, but discussions could fall apart at anytime. The WSJ article calls the move an agreement which could "mark a new phase in government efforts to stabilize U.S. banks and securities firms."

So far, the talks have been aimed at creating a "bad bank", an outside entity that would hold Citi's most toxic assets. Contingent to the terms of the deal, Citi would be forced to take losses on certain assets, leaving losses from the bank's remaining assets to be absorbed by the government and this outside entity. One source said the "bad bank" could hold up to $50 billion of assets.

The move follows a 60% slide in shares of Citigroup last week: shares opened last Monday around $9.50 and closed on Friday just under $4. This time last year, Citigroup's market cap was nearly $170 billion, while as of Friday, its market value totaled about $20 billion.

Shares of Citi are currently trading up about 6% on the news.

Citigroup Inc., doing business as Citi, provides a range of financial products and services to consumer and corporate customers in the United States and internationally.

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