Government saves Citigroup (C), gets in deeper

Add another $308 billion in balance sheet guarantees and another $27 billion more in invested capital to the $100 plus billion which has gone into AIG (NYSE: AIG) and the $250 billion or more that the Treasury has put into a number of large banks. That is what Citigroup NYSE: C) is getting as a bailout. The $308 billion will be to back Citi toxic funds. The bank will have to take the first $29 billion on losses from these. The $27 billion will buy preferred stock in Citi. The money will carry an 8% coupon.

Will the money save Citi? It is still too early to tell. Not included in the deal is the bank's huge credit card portfolio which could show massive losses as the recession causes consumers to default on the obligations.

According to The Wall Street Journal, "In addition to $2 trillion in assets Citigroup has on its balance sheet, it has another $1.23 trillion in entities that aren't reflected there. Some of those assets are tied to mortgages, and investors have worried they could cause heavy losses if they are brought back on the company's books.'

Are the gargantuan losses at Citi over? They may not be. The Treasury now has to hold its breath and hope it will not have to keep writing checks to Citi to back its initial investment.

Douglas A. McIntyre is an editor at 247wallst.com.