Here We Go Again: Feds Agree to Citibank Bailout

From the Wall Street Journal:

The federal government agreed Sunday to take unprecedented steps to stabilize Citigroup by moving to guarantee close to $300 billion in troubled assets weighing on the bank’s books.

Treasury has agreed to inject an additional $20 billion in capital into Citigroup under terms of the deal hashed out between the bank, the Treasury Department, the Federal Reserve and the Federal Deposit Insurance Corp. Treasury officials will charge a higher interest rate for the capital injection — 8% for the first few years — than it has charged to dozens of other banks now borrowing money under the government’s the $700 billion rescue package approved by Congress last month.

Here’s my prediction: It’s not going to work…  Sure it’ll make everyone feel good and stocks will rise in the short term but once the euphoria wears off and reality sinks in we’ll be right back where we started.

Michelle Malkin says:

Crap Sandwich 2.0 is morphing again.

We’ve gone from the toxic assets purchase plan to the capital injection plan to the throw-it-all-against-the-wall-and-whatever-the-hell-sticks-sticks non-plan plan.

And there in lies the problem, at least from my perspective… We rushed into this bailout business without really understanding the full scope of the problem and are now groping around in the dark trying to find a way out.