Highlights of the Citi Bailout

As anticipated, Citigroup was nationalized Sunday night with the government deciding to back $306 billion of the bank's loans and securities backed by residential and commercial real estate. Here are a couple of highlights from agreement terms that caught my attention:

- Axe the dividends:

Institution is prohibited from paying common stock dividends, in excess of $.01 per share per quarter, for 3 years without UST/FDIC/FRB consent. A factor taken into account for consideration of the USG's consent is the ability to complete a common stock offering of appropriate size.

- Taxpayer exposure:

Institution absorbs all losses in portfolio up to $29 bn (in addition to existing reserves)

Any losses in portfolio in excess of that amount are shared USG (90%) and institution (10%).

USG share will be allocated as follows: UST (via TARP) second loss up to $5 bn; FDIC takes the third loss up to $10 bn;

According to Reuters, S&P 500 futures rose 1.5 percent after the news.