Citigroup rescued, global leaders predict recovery timeline

Citigroup is the latest Wall Street financial company to receive a federal “rescue.”

The Treasury Department announced late Sunday it would inject $20 billion from its $700 billion bailout package. Citigroup previously received $25 billion from the Treasury to help the company survive.

Treasury and the FDIC will guarantee against the "possibility of unusually large losses" on up to $306 billion of risky loans and securities backed by commercial and residential mortgages.

Analysts said a Citigroup failure would have further crippled national lending markets and resulted in billions of dollars of losses among other companies that invested in debt and other financial products backed by Citigroup.

Opponents of the rescue say the move will jeopardize billions of taxpayers’ dollars and encourage other financial companies to take excessive risk knowing that the federal government will help clean up the mess.

Under the loss-sharing arrangement, Citigroup assumes the first $29 billion in losses on its risky pool of assets, and the government absorbs 90 percent of the remaining losses, and Citigroup 10 percent.

The Treasury rescue also calls on Citigroup to do more to help troubled homeowners. (Link here for the report from the Associated Press.)

How much longer might we see the need for government “rescues” of collapsing companies?

Possibly 18 months, according to a joint statement from 21 nations gathered in Lima, Peru, for the Asia-Pacific Economic Cooperation forum.

“We are convinced that we can overcome this crisis in a period of 18 months,” the leaders said in a statement. “We have already taken urgent and extraordinary steps to stabilize our financial sectors and strengthen economic growth.”

The 18-month prediction mirrors a report from the International Monetary Fund, which said developed economies would grow 0.1 percent in 2009, and the world would emerge from the crisis in 2010. (Link here for the report from the Associated Press.)