FDlt

Federal Deposit Insurance Corporation 550 17th Street NW, Washington, D.C. 20429-9990

Legal Division

Mr. Vern McKinley

20745 Ashburn Station Place Ashburn, VA 20147

APR 162010

RE: FDIC FOIA Log No. 09-1976

Dear Mr. McKinley:

This is in response to your electronic mail message of December 4,2009, in which you requested, pursuant to the Freedom oflnformation Act ("FOIA," 5 U.S.C. § 552), copies of any information available on the transaction described in FDIC Press Release 125-08, "Joint Statement by Treasury, Federal Reserve and the FDIC on Citigroup," including minutes of the FDIC Board Meeting on November 23, 2008 (the "Board Meeting"), the Board Case from the Board Meeting (the "Board Case"), and any other supporting memoranda.

We referred your request to the Executive Secretary Section of our Legal Division for a records search. The records search, now completed, located the minutes of the November 23,2008 Board Meeting ("Minutes"), exhibits filed with the Minutes ("Exhibits"), and the Board Case, dated November 23, 2008.

We processed the Minutes in accordance with the Sunshine Act and the Exhibits and Board Case in accordance with the FOIA. Subsection (f)(2) of the Government in the Sunshine Act,S U.S.C. § 552b (the "Sunshine Act"), requires that a Federal agency promptly make available to the public the transcript, electronic recordings, or minutes of certain meetings of its members, except for such items of discussion or testimony as the agency determines to contain information which may be withheld under Subsection (c) of the Sunshine Act. Subsection (k) of the Sunshine Act provides that the exemptions set forth in Subsection (c) take precedence over the exemptions set forth in the FOIA in cases involving requests for transcripts, electronic recordings, or minutes of meetings subject to the Sunshine Act.

The Board Meeting was closed to the public pursuant to Sunshine Act Subsections (c)(4), (c)(8), (c)(9)(A)(ii) and (c)(9)(B). Upon reviewing the Minutes in response to your request, however, we have determined that, with the exception of information that continues to be exempt from disclosure pursuant to Sunshine Act Subsections (c)(4), (c)(8) and (c)(9)(A)(ii), the Minutes may be disclosed. (Subsection (c)(9)(B) is no longer applicable, as the FDIC publicly disclosed its actions with respect to the subject matter.) Accordingly, a copy of the redacted version of the Minutes is enclosed.

Subsection (c)(4) of the Sunshine Act permits the withholding of trade secrets and commercial or financial information obtained from a person and privileged or confidential. Subsection (c)(8) of the Sunshine Act permits the withholding of information contained in or related to examination, operating or condition reports prepared by, on behalf of, or for the use of an agency responsible for the regulation or supervision of financial institutions. Subsection (c)(9)(A)(ii) of the

Sunshine Act permits the withholding of information the premature disclosure of which would, in the case of an agency which regulates currencies, securities, commodities or financial institutions, be likely to significantly endanger the stability of any financial institution.

We have also enclosed redacted versions of the Exhibits and the Board Case, with certain information withheld pursuant to FOIA Exemptions 4, 5 and 8,5 U.S.C.§§552 (b)(4), (b)(5) and (b)(8).

FOIA Exemption 4 permits the withholding of trade secrets and commercial or financial information that has been obtained from a person and is privileged or confidential. FOIA Exemption 5 permits the withholding of inter-agency or intra-agency memorandums or letters which would not be available by law to a party other than an agency in litigation with the agency, including, for example information that is privileged to an agency, such as information

contained in internal communications which relate to pre-decisional staff opinions, .

recommendations, and discussions of policy alternatives (deliberative process privileged information), documents and other memorandum prepared by an attorney in contemplation of litigation (attorney work-product privileged information) and confidential communications between an attorney and the agency (attorney-client privileged information). FOIA Exemption (b )(8) permits the withholding of information contained in, or related to, the examination, operating, or condition reports prepared by, on behalf of, or for the use of the FDIC in its regulation or supervision of financial institutions.

Because some of the requested information has been withheld, this letter constitutes formal notification that your request has been denied in part. You have the right to appeal this partial denial to the FDIC's General Counsel within 30 business days following receipt of this letter. If you decide to appeal, please submit your appeal in writing to the Legal Division, FOIAJPrivacy Act Group. Please refer to the FDIC log number and include any additional information that you would like the General Counsel to consider.

If you have any questions with respect to this matter, you may reach me at (202) 898-6902 or Senior FOIA Specialist JetTY Sussman at (202) 898-6904.

Thank you for your interest in the FDIC.

FOIAIPrivacy Act Group

Enclosures

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FEDERAL DEPOSIT INSURANCE CORPORATION

CERTIFIED COPY OF RESOLUTION OF THE BOARD OF DIRECTORS

I , Robert E, Feldman, Execut i ve Secretary of the Federal

Deposit Insurance Corporation, do hereby certify that the attached

is a true and correct copy of a resolution duly adopted at a

meeting of the Board of Directors of said Corporation, regularly

called and held on the 23rd day of November, 2008, at which a

quorum was present, and that the same has not been amended or

rescinded and is now in full force and effect.

(SEAL)

IN WITNESS WHEREOF, I have hereunto subscribed my name and caused the seal of the Corporation to be affixed hereto, in the City of Washington and District of Columbia, this 23rd day of November, 2008.

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Executive Secretary

Federal Deposit Insurance Corporation

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RESOLUTION

WHEREAS, staff has presented information to the Board of Directors ("Board") of the Federal Deposit Insurance Corporation ("FDIC" or "Corporation") indicating that the recent unprecedented disruption in credit markets and the resultant effects on the abilities of banks to fund themselves and to intermediate credit place the United States in danger of suffering adverse economic conditions and financial instability; and

WHEREAS, a proposal for the stabilization of the Banks and their affiliates without the appointment of the FDIC as receiver has been developed in consultation with the Board of Governors of the Federal Reserve System ("Federal Reserve Board") and the Secretary of the Treasury (collectively the "Agencies"), which involves the Agencies

provision of guarantees against loss on certain residential assets for 10 years and certain other assets for a period of 5 years; and

WHEREAS, Citigroup Inc. ("Citigroup") will take a first loss position equal to $37 billion; and

WHEREAS, for losses above $37 billion, there is a loss sharing agreement where losses are shared 10 percent by Citigroup and 90 percent by the Agencies with Treasury

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taking a second loss position up to $5 billion, the Corporation taking the third loss position up to $10 billion, and the Federal Reserve Board having agreed to take the remaining risk based on nonrecourse lending on the pool of assets ("Proposal"); and

WHEREAS, the Corporation is receiving $3 billion in preferred stock as compensation for its taking the $10 billion third loss position; and

WHEREAS, the Proposal is subject to prudential regulatory oversight and executive compensation restrictions, with the guarantees having a limited duration, and staff believes that the Proposal will avoid or mitigate the serious adverse effects on economic conditions or financial stability in the most cost effective method; and

WHEREAS, the FDIC, the Office of the Comptroller of the Currency, and the Office of Thrift Supervision have

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BE IT FURTHER RESOLVED, that the Board finds that the

BE IT FURTHER RESOLVED, that the Board finds that the

BE IT FURTHER RESOLVED, that the Board hereby

BE IT FURTHER RESOLVED, that the Board hereby authorizes the Director, Division of Resolutions and Receiverships, or his designee, and all other FDIC staff to take all appropriate action to implement the provision of assistance authorized hereunder, including but not limited to: credit support in the form of loan guarantees, and loss sharing, and to take any other action necessary and appropriate in connection with this matter.

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56617

Minutes

of

The Meeting of the Board of Directors

of the

Federal Deposit Insurance Corporation

By Conference Call

Closed to Public Observation

November 23, 2008 - 10:04 P.M.

At 10:04 p.m. on Sunday, November 23, 2008, the Chairman called a special meeting of the Board of Directors of the Federal Deposit Insurance Corporation which was held by means of a telephone conference call.

Sheila C. Bair, Chairman of the Board of Directors;

Martin J. Gruenberg, Vice Chairman of the Board of Directors; Thomas J. Curry, Director (Appointive); John C. Dugan, Director (Comptroller of the Currency); John M. Reich, Director (Director, Office of Thrift Supervision); John F. Bovenzi, Deputy to the Chairman and Chief Operating Officer; Steven O. App, Deputy to the Chairman and Chief Financial Officer;

Jason C. Cave, Acting Deputy to the Chairman; Jesse O. Villarreal, Chief of Staff; Michael H. Krimminger, Special Advisor for Policy, Office of the Chairman; Barbara A. Ryan, Deputy to the Vice Chairman; Lisa K. Roy, Deputy to the Director

(Appointive); William A. Rowe, III, Deputy to the Director (Comptroller of the Currency); Claude A. Rollin, Deputy to the Director (Director, Office of Thrift Supervision); John V. Thomas, Acting General Counsel; Sandra L. Thompson, Director, Division of Supervision and Consumer Protection; Arthur J. Murton, Director, Division of Insurance and Research;

Mitchell L. Glassman, Director, Division of Resolutions and Receiverships; Eric J. Spitler, Director, Office of Legislative Affairs; Andrew S. Gray, Director, Office of Public Affairs; and Robert E. Feldman, Executive Secretary, participated in the meeting.

Also participating in the meeting were: Christopher J.

Spoth, John M. Lane, Serena L. OWens, John H. Corston,

56618

Patricia A. Colohan, Pete D. Hirsch, Marc Steckel, and Christine Grum, from the Division of Supervision and Consumer Protection:

Richard T. Aboussie, David N. Wall, and Mark G. Flanigan, from the Legal Division; Diane L. Ellis, Miguel D. Browne, Christopher J. Newbury, and Matthew Green, from the Division of Insurance and Research: James R. Wigand and Herbert J. Held, from the Division of Resolutions and Receiverships; Tiffany K. Froman, from the Division of Information Technology: and

Alice C. Goodman, from the Office of Legislative Affairs.

Julie L. Williams, First Senior Deputy Comptroller and Chief Counsel; and Douglas W. Roeder, Senior Deputy Comptroller, Large Bank Supervision, Office of the Comptroller of the Currency, also participated in the meeting.

Chairman Bair presided at the meeting; Mr. Feldman acted as Secretary of the meeting.

Chairman Bair called the meeting to order. Vice Chairman Gruenberg then moved that the Board of Directors determine that Corporation business required its consideration of the matters which were to be the subject of the meeting on less than seven days' notice to the public; that no earlier notice of the meeting was practicable: that the public interest did not require consideration of the matters which were to be the subject of the meeting in a meeting open to public observation: and that the matters could be considered in a meeting closed to public observation by authority of subsections (c) (4), (c) (8), (c) (9) (A) (ii), and (c) (9) (B) of the "Government in the Sunshine

Act" (5 U.S.C. 552b( (c) (4), (c) (8), (9) (A) (ii), and (c) (9) (B» . Chairman Bair seconded the motion and, with Director Reich, Director Curry, and Director Dugan concurring, the motion was carried.

James R. Wigand, Deputy Director, Franchise and Asset Marketing Branch, Division of Resolutions and Receiverships ("ORR"), presented to the Board staff's recommendation that the

Board find that .. , "

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November 23, 2008 (Closed)

56619

OO:(I~lIill11~~;a~J&'i~'1:2"Y;1{~?,}0~~'F';('tZill an~ ~uthorize staff. to take

necessary steps to 1mp ement tne prov1s10n of Corporat10n

assistance to Citigroup in the manner he would outline to the Board. Mr. Wigand informed the Board that, based on preliminary information, staff estimates no loss to the Deposit Insurance Fund as a result of the recommended assistance.

Mr. Wigand continued, stating that,,~~~~~~~~~~~~~ '!)ifTiK!:::&1;~j~ffijf,~{jd~i:1 )frFJt;1~&iH:il¥1~'i!R~~{'tJI;§:": s t af f wa s re co

authorize the Corporat10n to enter into a transaction to provide for shared loss coverage on a designated pool of assets approximately $306 billion in size, along with the U.S. Department of the Treasury's ("Treasury") Troubled Asset Relief Program ("TARP"), with the Corporation's potential loss protected by the

issuance of preferred stock by Citigroup. He added that the Corporation and the TARP will provide guarantees on certain residential assets for 10 years and certain other assets for a period of 5 years. The Corporation, he said, will be exposed to loss only after Citigroup absorbs the first $37 billion in losses and the TARP absorbs the next $5 billion in losses. Mr. Wigand stated that the Corporation's loss share will be capped at $10 billion and it will receive compensation in the form of $3 billion in preferred stock. In addition, he said, the Board of Governors of the Federal Reserve System ("Federal Reserve") will provide certain financing secured, in part, by assets in a portfolio of consumer and commercial loans designated by the Corporation, Treasury, and the Federal Reserve (collectively, the "Agencies") and Citigroup.

Mr. Wigand next stated that Citigroup and the Agencies will share losses, with Citigroup having a 10 percent loss share on all losses in excess of the $37 billion. He explained that the TARP will take the second loss position up to $5 billion and the Corporation will take the third loss position up to $10 billion, with the loss share of the TARP and the Corporation capped as explained above and the Federal Reserve taking remaining losses. Mr. Wigand then informed the Board that Citigroup will manage the assets, with instructions provided by the Agencies. Among the instructions, he specified, will be those requiring use of loan modification procedures comparable to those introduced by the Corporation on August 20, 2008, at IndyMac Federal Bank, FSB, Pasadena, California, of which the Corporation is conservator, unless otherwise agreed. In addition, Mr. Wigand stated that Citigroup will be subject to specific limitations on executive compensation and dividends during the loss share period.

November 23, 2008 (Closed)

56620

Mr. Wigand then informed the Board that the Corporation, the Office of the Comptroller of the CUrrency ("OCC"), and the

Office of Thrift (\'lOTS") have determined that the

In exchange for the guarantees Mr. Wigand had described, he explained that Citigroup has agreed to (1) seek the prior approval of the Agencies before paying dividends for three years; (2) develop an executive compensation program that rewards long-term performance and profitability to be approved by the Agencies; and (3) implement loan modification procedures conforming with the

Corporation's model used at IndyMac Federal Bank, FSB, for mortgages in the asset pool, unless otherwise agreed. Additionally, as Mr. Wigand had previously stated, the Corporation and the TARP will receive preferred stock as reasonable compensation for the guarantees provided.

Mr. Wigand then requested that John H. Corston, Associate Director, Large Institutions and Analysis Branch, Complex Financial Institutions, Division of Supervision and Consumer Protection, provide the supervisory history and condition of Citigroup and its insured bank and thrift affiliates. Mr. Corston explained that Citibank, National Association, Las Vegas, Nevada ("CBNA") is a nationally chartered bank founded in 1812 that is the lead bank within Citigroup, a financial holding company regulated by the Federal Reserve; and that CBNA is the third largest bank in the nation and is the predominant legal entity representing 63 percent of consolidated holding company assets. He then explained that the remaining insured legal entities of Citigroup consist of an additional two national banks, one federal savings bank, and one state non-member bank, respectively, as follows: Citibank (South Dakota), N.A., Sioux Falls, South Dakota; Department Stores National Bank, Sioux Falls, South, Dakota; Citicorp Trust Bank, fsb, Wilmington, Delaware; and Citibank (Banamex USA), Century City, California. He then continued, stating that Citigroup is the largest consumer finance lender in the world, third largest mortgage servicer, and the fourth largest student lender. It is also, he said, the world's largest credit card lender and the third largest in the United States as well as one of the world's largest private banking and private wealth management businesses.

November 23, 2008 (Closed)

56621

Mr. Corston added that Citigroup has three principal nonbank subsidiaries: Citigroup Global Markets Holdings, Inc., a broker-dealer; Citigroup Funding, Inc., the primary funding vehicle of CitigrouPi and Associates First Capital Corporation, the parent company of CitiFinancial, which provides consumer finance. In addition, he said, there is one foreign banking subsidiary-Grupo Financiero de Banamex SA de CV, a Mexican banking organization.

Mr. Corston then stated that CBNA engages in extensive foreign activities and has operations in over 100 countries, operating approximately 1,000 retail branches in 13 states, the District of Columbia, and Guam. He said that CBNA reported foreign assets of $612 billion and foreign deposits of $554 billion held either in direct foreign branches of CBNA or in other foreign entities that are mostly owned by the CBNA's Edge Act investment subsidiary, Citibank Overseas Investment Corp.

(-COIC"). COIC, Mr. Corston explained, has over 20 foreign banks that are headquartered and chartered in countries around the world.

November 23, 2008 (Closed)

56622

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Mr. Corston then emphasized that (ql(8r~{(~lC~!Y

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and other developments, he said, point to a clear nexus between financial market turmoil and impaired economic performance that

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November 23, 2008 (Closed)

56623

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In creating the systemic risk exception, Mr. Corston stated that Congress clearly envisioned that circumstances could arise in which the exception should be used. He concluded his by stating that,

Director Curry agreed with Vice

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November 23, 2008 (Closed)

56624

November 23, 2008 (Closed)

November 23, 2008 (Closed)

56626

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Staff then responded to questions from Director Reich regarding the "ring-fencing"-specific identification of assets in an asset pool-of the previously referenced $306 billion asset pool that was the subject of the loss share coverage and regarding the Corporation's standard loss sharing protocol. Also in response to a question from Director Reich, Mr. Thomas indicated that the dividend restrictions under which Citigroup must seek the Agencies' consent to pay in excess of $.01 per share per quarter for three years are contractual in nature versus the separate supervisory basis the OCC has under which it, too, can restrict the payment of dividends with respect to Citigroup's national banks.

Director Reich then asked (cn~r~]~n~)~~---'------ ---- . --,,--

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November 23, 2008 (Closed)

56627

Vice Chairman Gruenberg then thanked the Corporation's staff, many of whom had been at work the entire weekend in connection with this matter as well as the staff of other agencies for their extraordinary efforts. Chairman Bair concurred with Vice Chairman Gruenberg's statement and noted that many staff still had a long night before them working on executing the necessary agreements and making announcements to the media.

Then, in accordance with the recommendation of staff and on motion of Vice Chairman Gruenberg, seconded by Director CUrry, concurred in by Director Dugan, Director Reich, and Chairman Bair, the Board adopted the following resolution:

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(2)

November 23, 2008 (Closed)

(3 )

56628

(4)

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authorizing the Director, Division of Resolutions and Receiverships, or his designee, and all other Corporation staff to take all appropriate action to implement the provision of assistance authorized hereunder, in~luding but not limited to: credit support in the form of loan guarantees, and loss sharing, and to take any other action necessary and appropriate in connection with this matter:

WHEREAS, staff has presented information to the Board of Directors ("Board") of the Federal Deposit Insurance Corporation ("FDIC" or "Corporation")

November 23, 2008 (Closed)

56629

WHEREAS, staff has advised the Board of the FDIC

WHEREAS, a proposal for the stabilization of the Banks and their affiliates without the appointment of the FDIC as receiver has been developed in consultation with the Board of Governors of the Federal Reserve System ("Federal Reserve Board") and the Secretary of the Treasury (collectively the "Agencies"), which involves the Agencies provision of guarantees against loss on certain residential assets for 10 years and certain other assets for a period of 5 years; and

WHEREAS, Citigroup Inc. ("Citigroup") will take a first loss position equal to $37 billion; and

WHEREAS, for losses above $37 billion, there is a loss sharing agreement where losses are shared 10 percent by Citigroup and 90 percent by the Agencies with Treasury taking a second loss position up to $5 billion, the Corporation taking the third loss position up to $10 billion, and the Federal Reserve Board having agreed to take the remaining risk based on nonrecourse lending on the pool of assets ("Proposal"); and

November 23, 2008 (Closed)

56630

WHEREAS, the corporation is rece1v1ng $3 billion in preferred stock as compensation for its taking the $10 billion third loss position; and

WHEREAS, the Proposal is subject to prudential regulatory oversight and executive compensation restrictions, with the guarantees having a limited duration, and staff believes that the Proposal will avoid or mitigate'the serious adverse effects on economic conditions or financial stability in the most cost effective method; and

WHEREAS, the FDIC, the Office of the Comptroller of the CUrrency, and the Office of Thrift Supervision have determined that ~'1~~~~

November 23, 2008 (Closed)

56631

BE IT FURTHER RESOLVED, that the Board hereby authorizes the Director, Division of Resolutions and Receiverships, or his designee, and all other FDIC staff to take all appropriate action to implement the provision of assistance authorized hereunder, including but not limited to: credit support in the form of loan guarantees, and loss sharing, and to take any other action necessary and appropriate in connection with this matter.

[EXECUTIVE SECRETARY'S NOTE: On Sunday, November 23, 2008, the United States government entered into an agreement with Citigroup Inc., to provide a package of guarantees, liquidity access, and capital, whereby, as part of the agreement, the Department of the Treasury and the Corporation will provide protection against the possibility of unusually large losses on an asset pool of approximately $306 billion of loans and securities backed by residential and commercial real estate and other such assets, which will remain on Citigroup's balance sheet. As a fee for that arrangement, Citigroup will issue preferred shares to the Treasury and the Corporation. In addition, Citigroup will comply with enhanced executive

November 23, 2008 (Closed)

56632

compensation restrictions and implement the Corporation's mortgage modification program.]

Documents and materials relevant to the Board's consideration of the foregoing are marked an exhibit for identification, are filed in the jacket of this meeting, and, by reference, are made a part of these minutes and the permanent files of the Board of Directors.

There being no further business, the meeting was adjourned.

Executive Secretary

November 23, 2008 (Closed)

EXHIBIT

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SHEILA C. BAIR CHAIRMAN

November 24. 2008

CD FEDERAL DEPOSIT INSURANCE CORPORATION. Washington, DC 20429

Honorable Henry M. Paulson, Jr. Secretary of the Treasury

1500 Pennsylvania Avenue, N.W. Washington, D.C. 20220

Dear Mr. Secretary:

I am writing to formally confirm Sunday's action by the Board of Directors of the Federal Deposit Insurance Corporation and the responsibilities of the FDIC under section 13(c) (4) (0) of the Federal Deposit Insurance Act (FDI Act) (12 U.S.C. § 1823 (cX4)(G» as they relate to the loss sharing assistance (Proposal) involving Citigroup Inc. 's subsidiary insured depository institutions (Citigroup). The FDIC consulted with the Board of Governors of the Federal Reserve System (Federal Reserve), the Treasury Department (Treasury). and other federal banking supervisors regarding the development and implementation of the Proposal. Copies of the Board Resolution and the Board Memorandum are enclosed.

The Proposal was developed through the combined efforts of the FDIC. the Federal Reserve and the Treasury and will provide for shared loss coverage on a Citigroup pool of assets of approximately S306 billion. The Proposal provides that Citigroup will take a first loss position on losses from the pool of assets up to $37 billion. Citigroup will have a 10 percent loss share on all losses in excess 0($37 billion. The Treasury Troubled Asset Relief Program (TARP) will take a second loss position up to $S billion with the FDIC taking a third loss position of up to S10 billion. The Federal Reserve will take the remaining losses. Citigroup will manage the assets during the loss share period. and it will implement a loan modification program modeled after FDIC procedures employed at IndyMac Federal Bank, unless other procedures are approved by FDIC. Citigroup will be subject to limitations on executive compensation and dividends. For its participation the FDIC will receive $3 billion in preferred stock. The FDIC, OCC and OTS have determined that the Citigroup insured entities meet the requirements of section 13(c)(8) of the FDI Act (12 U.S.C. § 1823 (c)(8» for receiving direct financial assistance before appointment of a receiver.

SectionsI3(c)(4)(A) and 13(c)(4)(E) of the FDI Act, (12 U.S.C. §§ 1823 (c)(4)(A) and (E». generally prohibit the Corporation (rom laking any action that would have the effect of increasing losses to the Deposit Insurance Fund by protecting creditors other than insured depositors, and from taking any actions that benefit shareholders, except that section J3(c)(4)(G) permits such action where a systemic risk determination is made that compliance with sections

I 3 (c)(4)(A) and 13(c)(4)(E) would have serious adverse effects on economic conditions or financial stability, and such action would avoid or mitigate such adverse effects. The Board of Directors of the FDIC determined that the failure ofCitigroup's insured depository institutions would have serious adverse affects on economic conditions and financial stability and constitute a systemic risk to the banking system.

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Based on this determination, the Board of Directors of the FDIC. by the unanimous vote of its five members, on Monday determined that compliance by the FDIC with the requirements of the FDI Act (12 U.S.C. § IS23 (c)(4)(A) and (E» would have serious adverse effects on economic conditions and financial stability. The Board also unanimously detennined that the action or assistance to be provided by the FDIC under the Proposal and permitted under the systemic risk exception (12 U.S.C. § IS23(c)(4)(G» would avoid or mitigate such adverse effects and is likely to minimize the cost to the Deposit Insurance Fund. The Board of Directors of the FDIC, by the unanimous vote of its five members has also determined that the Citigroup insured entities meet the requirements of section l3(c)(S) of the FDI Act (12 U.S.C. § 1823 (c)(S) for receiving direct financial assistance before appointment of a receiver.

The Board of Directors of the FDIC believes that the Proposal will reinforce the capital position ofCitigroup's insured entities thereby promoting financial stability and investor confidence in the banking sector and more broadly. Further the Proposal, in conjunction with the other federal government programs including the Treasury Department's capital purchase program. will help stabilize the U.S. banking industry and the financial markets. and provide material benefits to households. businesses. and U.S. taxpayers.

Sincerely.

Sheila C. Bair

cc, Honorable Ben S. Bernanke

Chairman, Board of Governors of the Federal Reserve System

Enclosures

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FDIC: Press Releases - PR-125-2008 1112312008

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Page 1 of I

ttcme > !!Ie!!a.&..Emnl& > Press Releases

Press Releases

Joint Statement by Treasury, Federal Reserve and the FDIC on Citigroup

Washington, DC- The U.S. government is committed to supporting financial market stability, which is a prerequisite to restoring vigorous economic growth. In support of this commitment, the U.S. govemment on Sunday entered into an agreement with Citigroup to provide a package of guarantees. liquidity access and capital.

As part of the agreement. Treasury and the Federal Deposit Insurance Corporation will provide protection against the possibility of unusually large losses on an asset pool of approximately $306 billion of loans and securities backed by residential and commercial real estate and other such assets. which will remain on Citigroup's balance sheet. As a fee for this arrangement, Citigroup will issue preferred shares to the Treasury and FDIC. In addition and if necessary. the Federal Reserve stands ready to backstop residual risk in the asset pool through a non-recourse loan.

In addition. Treasury will invest $20 billion in Citigroup from the Troubled Asset Relief Program in exchange for preferred stock with an 8% dividend to the Treasury. Citigroup will comply with enhanced executive compensation restrictions and implement the FDIC's mortgage modification program.

With these transactions, the U.S. government is taking the actions necessary to strengthen the financial system and protect U.S. taxpayers and the U.S. economy.

We will continue to use all of our resources to preserve the strength of our banking institutions and promote the process of repair and recovery and to manage risks. The following principles guide our efforts:

• We will work to support a healthy resumption of credit nows to households and businesses.

• We will exercise prudent stewardship of taxpayer resources.

• We will carefully circumscribe the involvement of government in the financial sector.

• We will bolster the efforts of financial institutions to attract private capital.

Attachment

Summary of Terms (e.Qf.J:I.~JR)

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FDIC PR-125-2008

Last Updated 1112312008

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1112412008

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November 23, 2008

MEMORANDUM:

The Board of Directors

Mitchell L. Glassman, Director~~ ~ Division of Resolutions and Receiverships

Sandra L. Thompson, Director 87} 1'l/~ Division of Supervision and Consumer Pro'~tion \

James R. Wigand, Deputy Director ~

Franchise and Asset Marketing Branch

Division of Resolutions and Receiverships

Herbert J. Held, Assistant Director ~ ~ Franchise and Asset Marketing Branch \ Division of Resolutions and Receiverships

THROUGH:

FROM:

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SUBJECT: Citibank, National Association, Las Vegas, Nevada

Citibank (South Dakota), National Association. Sioux Falls, South Dakota Department Stores National Bank, Sioux Falls, South Dakota

Citicorp Trust Bank. FSB, Wilmington. Delaware

Citibank (Banamex USA). Century City, California

Citigroup Inc. (Bank Holding Company) Information ($ Thousands) (As of June 30. 2008):

Total Assets: $2,100,385,000

Total Deposits (including Foreign): $803,642,000 Uninsured Deposits: $181.183.775,

Foreign Deposits: $543.287,000

Tier 1 Leverage/Total Risk Based (Lead Bank): 6.51/13.38

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In order to prevent the foregoing systemic risks. staff recommends that the Board authorize

the FDIC to enter into a transaction to provide for shared loss coverage, along with the u.s.

Treasury's Troubled Asset Relief Program, with the FDIC's potential loss protected by the issuance

of preferred stock by Citigroup. The FDIC and the U.S. Treasury's Troubled Asset Relief Program

(Usrr ARP) will provide guarantees on certain residential assets fOT 10 years and certain other assets

for a period of5 years. The FDIC will be exposed to loss only after Citigroup absorbs the first $37

billion in losses and the TARP absorbs $5 billion in losses. The FDIC's loss share will be capped at

$10 billion and it will receive compensation in the form ofS3 billion in preferred stock. In addition,

the Board of Governors of Federal Reserve will provide certain financing secured, in part, by assets

in a portfolio of consumer and commercial loans designated by the Agencies and Citigroup. I The

chart below provides detail on estimated losses.

I The FDIC, Treasury and the Board ofGovemors of Federal Reserve will be referred to collectively as the Agencies.

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Citigroup and the Agencies will share losses with Citigroup will having a 10 percent loss

share on all losses in excess of the $37 billion. The usrr ARP takes the second loss position up to $5

billion and the FDIC takes the third loss position up to $10 billion. The loss share of the FDIC and

usrr ARP will be capped as above. The Federal Reserve will take remaining losses. Citigroup will

manage the assets, with instructions provided by the FDIC. usrr ARP and Federal Reserve.

Instructions will include required use ofloan modification procedures comparable to those used at

IndyMac Federal Bank, unless otherwise agreed. In addition, Citigroup will be subject to specific

limitations on executive compensation and dividends during the loss share period.

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Commitments by Citlgroup

In exchange for the guarantees discussed above, Citigroup has agreed to 1) seek the prior

approval of the Agencies before paying dividends for 2 years; 2) develop an executive compensation

program that rewards long-term performance and profitability to be approved by the Agencies; 3)

implement loan modification procedures conforming with the FDIC's model used at IndyMac

Federal Bank for mortgages in the asset pool unless otherwise agreed. Additionally the FDIC and

usrr ARP will receive preferred stock as reasonable compensation for the guarantees provided.

Executive Summary

Cititbank, NA (CBNA or Bank) is a nationally chartered bank founded in 1812 that is the

lead bank within Citigroup, Inc. (Citigroup) a financial holding company regulated by the

Federal Reserve. CBNA is the third largest bank in the nation and is the predominant legal entity

representing 63 percent of consolidated holding company assets. The insured legal entities of

Citigroup consist of three national banks. one federal savings bank and one state non-member

bank. Citigroup is the largest consumer finance lender in the world, third largest mortgage

servicer and the fourth largest student lender. It is the world's largest credit card lender and the

third largest in the United States. It is also one of the world's largest private banking and private

wealth management businesses.

Citigroup has three principal nonbank subsidiaries; Citigroup Global Markets Holdings,

Jnc (broker-dealer); Citigroup Funding, Inc (primary funding vehicle of Citigroup); and

Associates First Capital Corporation (parent company of CitiFinancial , which provides

consumer finance). There is one foreign banking subsidiary Grupo Financiero de Banamex SA

de CV (Mexican banking organization).

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CBNA engages in extensive foreign activities and has operations in over 100 countries.

It operates approximately 1,000 retail branches in 13 states. the District of Columbia, and Guam.

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Supervisory History and Condition

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Supervisory History

The insured legal entities ofCitigroup are shown in the table below.

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Entities (913012008) Assets Deposits :
Citibank, National Association 1.201.007 748,841 I
Citibank (South Dakota). N.A. 77.738 42.357
Citicorp Trust Bank. FSB 19,599 7.231
Citibank (Banamex USA) 1.323 1,009
Department Stores National Bank 375 301 6

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Citibank, National Association (CRNA)

Citibank (South Dakota). N.A.

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Citicorp Trust Bank, FSB

This thrift originates fixed-rate, nonconforming (nonprime), single-family residential real

estate mortgages and private-label credit card loans. The thrift does not have a branch network.

Citibank (Banamex USA)

This non-member bank provides banking services for companies and individuals in

Mexico and the United States. Banarnex USA offers checking and master accounts, time deposit

accounts, electronic funds transfer, foreign exchange, and VISA or MasterCard credit cards for

individuals. Banarnex USA provides corporate banking products, such as working capital loans,

import/export lines of credit, accounts receivable and inventory financing, commercial and

stand-by letters of credit, and deposit and investment accounts. Banamex USA was founded in

1963 as Community Bank of San Jose and changed its name to California Commerce Bank, Inc.

in 1980, and finally changed its name to Citibank (Banamex USA) in 2006.

Department Stores National Bank (DSNB)

DSNB is the credit card issuer of Visa and retail private label accounts for Citigroups'

relationship with Macy's Inc. DSNB is a subsidiary ofCitibank (South Dakota), N.A., and does

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not have any employees or any branch banking offices. All servicing of DSNB's accounts is

currently provided by atliliates and third parties.

Systemic Risk

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r" . -~~-~; Disruptions to global money and credit markets sinee September have resulted in

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sharp downturns among major coincident indicators of real economic activity. The index of

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industrial production published by the Federal reserve Board declined by 4.2 points in September - its largest point decline ever and the largest decline in percentage terms in over 50 years.

Retail sales fell 2.8 percent in October, the largest monthly decline in over 20 years, exceeding even the monthly decline immediately following the September 2001 terrorist attacks. Payroll jobs declined by 240,000 in October and a revised 284,000 in September as employers reacted to financial market uncertainty by cutting back on positions. ~~FB§)la};\'rf(;6~':)'¥m'/W:(iM:jf3:':ff;¥fht0;!i16i,

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This recommendation is supported by:

JaM' • Thomas

Acting General Counsel

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