Citigroup Bailout Agreed; New Era of Government Involvement and What it Means to You

The United States taxpayers became Citigroup's best friends yesterday, as Sunday evening brought with it the unveiling of a finalized Citibank bailout plan. According to MarketWatch, the Citigroup bailout marks the "first time the government has absorbed bad assets rather than inject money directly into financials." The plan, which includes executive compensation limitations and mortgage modification plans, comes on the heels of Citibank layoffs and a stock closing of $3.77 on Friday. What's on the mind of the American taxpayer, however, isn't the specifics of the plan. Rather, Americans really want to know what the Citigroup bailout means to them, their investments, and a struggling economy.

The Citigroup Bailout announcement might make the financial industry a bit more secure, the American taxpayers are starting to worry about where all this money is coming from, and what it can mean for them in the long run.

According to the New York Daily News, "taxpayers will get preferred stock that pays an 8% annual dividend." In addition, the hope is that Citigroup's bailout will help bring the US economy back in balance. Unfortunately, broad statements like this do little to reassure struggling Americans uninvolved in Citigroup's investments themselves.

As a US taxpayer, you may be concerned about what interventions like this will mean on your next tax bill and in your own life. For now, the impact remains to be seen. In an already struggling economy, the Citigroup bailout's long-term effects on taxpayers might not become apparent for the next year or more.

While the government's hope is that this and other related bailouts will help stabilize the economy, a direct impact on American taxpayers is unclear. If you are a Citigroup investor, sitting tight and waiting this crisis out might be a better idea than dumping your shares at a tremendous loss.

Whatever the effect on the American taxpayer, the Citigroup bailout marks a new era of government involvement in the financial industry and private market. With long-reaching potential effects on both Americans and the economy, all eyes are turned towards Washington and Wall Street.

Resources:

Market Watch; http://www.marketwatch.com/News/Story/us-agrees-bail-out-citigroup/story.aspx?guid=%7B15A026EC%2DCEA0%2D4C82%2D92EC%2D199B794F0968%7D

New York Daily News; http://www.nydailynews.com/money/2008/11/23/2008-11-23_taxpayers_to_rescue_in_20_billion_citigr.html