WSJ is reporting Citigroup is near a deal on a bailout... and Dana Perino knows nothing about it.

[DCBob]

Citigroup Inc. is nearing agreement with U.S. government officials to create a structure that would house some of the financial giant's risky assets, according to people familiar with the situation. While the discussions remain fluid and might not result in an agreement, talks were progressing Sunday toward creation of what would essentially be a "bad bank." That structure would help Citigroup cleanse its balance sheet of billions of dollars in potentially toxic assets, these people said.

The bad bank also might absorb assets from Citigroup's off-balance-sheet entities, which hold $1.23 trillion. Some of those assets are tied to mortgages, and investors have worried such assets could cause heavy losses if they land on the company's balance sheet. Citigroup also has about $2 trillion in loans, securities and other assets on its balance sheet as of Sept. 30. Behind the push is a broad effort to shore up faith in the New York company, which saw its stock price tumble by 60% last week to a 16-year low.

Under the terms being discussed, Citigroup would agree to absorb losses on assets covered by the agreement up to a certain threshold. The federal government would cover losses beyond that level, people familiar with the matter said. One person said the new entity is expected to hold about $50 billion of assets.

more: http://online.wsj.com/article/SB122747680752551447.html

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This is big news but apparently when asked about it this afternoon WH Press Secretary Dana Perino said she knew nothing about. No wonder there is a lack of confidence in this administration.

[Avalon6]

1. If Citi bank fails, it will be a DISASTER for any hopes of economic recovery

If the 2nd largest bank goes under, then the headline will be any bank can fail.

[DCBob]

3. Yeah, that's the way I see it too. Interesting approach on this deal...

creating a "bad bank" and a "good bank". Hope it works.

[sandnsea]

6. That was the $750 billion plan

Take the bad debts off the balance sheets of banks. I have no idea why they didn't do it - or why they are going to do it with Citi when they decided against it with the rest. It doesn't really matter. They are clearly completely clueless as to what to do about this mess they created.

[DCBob]

8. This sounds a bit different.

Instead of the Feds buying the bad debt, Citibank-bad would hold the bad debt and the Fed would just back them or guarantee them somehow if they fail. That's the way I read it anyway.

[sandnsea]

9. Citi would create a new bank?

Like corporations create subsidiaries? And the Fed would back the new "bad bank"? Is that what they're planning??

[DCBob]

10. Yes. That is way I understand it.

It separates the bad liability so the "good" Citibank can function normally.

[sandnsea]

15. I don't know why they need the "bad bank"

Why don't they just pull this bad debt off the accounts through the Fed, like they were going to all along. Maybe there's too much of it for the Fed to buy, trillions. Yeah, that would be it I guess. Great. So we're going to guarantee these "bad banks" that are going to be holding trillions in debt. Is that it?

But boy, don't write a $20.00 bad check. You need to go to jail for that. :grr:

[DCBob]

16. Yes, it appears that way.

One of the big benefits is that Citibank-good will become much more attractive to investors so that should help it stay afloat until things improve.

[Hippo_Tron]

2. I'm sure that Dana Perino thinks that Citigroup is a group of cities

[DCBob]

4. Clueless fits her nicely.

Can't wait to see Gibbs up there.

[ben_meyers]

5. Perino not only should be kept up to the minute

on these important negotiations, she should probably be in the room with them!

[gravity]

7. Citi wouldn't need a bailout if the SEC regulated short selling

Citi is solvent, but there are still ways short selling and rumor mongering that create a self fulfilling prophecy.

[madamesilverspurs]

11. Again...

isn't the Bush family heavily invested in CITI? Shouldn't that be of concern?

[Thrill]

12. No administration with two months left should be able to make these

moves

[DCBob]

13. Agreed but it sounds like the deal is very close to being settled.

Could be announced tonight.

[Thrill]

14. Are they still going to go through with those layoffs?

Why bailout a company without conditions to keep the workers?

[DCBob]

17. Don't know but I suspect there will still be layoffs.

This deal does not solve the bigger problem. It just helps keep Citi in business.

[amandabeech]

18. If this goes through, will Citibank be required to make loans?

I don't like anything without strings.

And of course, Citibank gets lots of help and the Big 3 can twist in the wind!

Until the Big 3 get their lines of credit and Citibank is required to actually act like a bank and make loans,

let them eat fenders!