Bush, this morning, talking about the $20 billion decision to help out Citigroup:
Citigroup lost about half of its stock value last week. Bush and Paulson have decided to give them an additional $20 billion from the $700 billion bail-out, and the government will guarantee more than $300 billion in risky loans held by the bank.
Citigroup will shoulder losses on the first $29 billion of that portfolio.
Any remaining losses will be split between Citigroup and the government, with the bank absorbing 10 percent and the government absorbing 90 percent. The Treasury Department will use its bailout fund to assume up to $5 billion of losses. If necessary, the Federal Deposit Insurance Corp. will bear the next $10 billion of losses. Beyond that, the Federal Reserve will guarantee any additional losses.
In exchange, Citigroup will issue $7 billion of preferred stock to government regulators. In addition, the government is buying $20 billion of preferred stock in Citigroup. The preferred shares will pay an 8 percent dividend and will slightly erode the value of shares held by investors.
Citigroup will also agree to certain executive compensation restrictions, which will be reviewed by regulators. It will also put in place the FDIC's loan modification plan, which is similar to one it recently announced.
Barack Obama is set to announce his economic team at a press conference around noon today. In addition to pure personnel, we should look for hints that Team Barry will be holding off on long-promised tax hikes on the upper income brackets in exchange for hefty domestic spending and economic stimulus plans.
Obama signaled that he would pursue a far more ambitious plan of spending and tax cuts than he had outlined during his campaign and planned to announce his economic team on Monday. Some Democrats in Congress, meantime, were calling for the government to spend as much as $700 billion to stimulate the economy over the next two years.
During an appearance on NBC's "Meet the Press," Obama economic adviser William Daley suggested that the incoming administration would reconsider whether to quickly increase taxes for Americans earning more than $250,000 per year.
Daly, who was commerce secretary under former President Bill Clinton and is the brother of Chicago Mayor Richard Daly, said it looks "more likely than not" that Obama would not seek legislation to repeal President George W. Bush's cut in the tax rate for the wealthiest Americans before it is scheduled to expire after the 2010 tax year. Bush cut the top rate to 35% from 39.6% in 2001...
David Axelrod, an Obama political strategist who was recently named as one of the president-elect's senior White House advisers, also suggested during an appearance on "Fox News Sunday" that Obama was considering delaying the tax increase, but he did not elaborate.
Larry Summers, who will head Obama's National Economic Council, suggested in 2007 that while he doesn't like tax cuts for the rich, tax hikes are not a good idea in a downturn:
With respect to the short term, especially if the economy turns down, that would not be the right moment to seek to increase taxes.
Video after the jump:
