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CRISIS AND PANIC 

that was needed, Citigroup contended, was for the government to expand access to
existing liquidity facilities. “People were questioning what everything was worth at
the time. . . . [T]here was a flight not just to quality and safety, but almost a flight to
certainty,” Kelly, then Pandit’s adviser, told the FCIC. 
The FDIC dismissed Citigroup’s request that the government simply expand its
access to existing liquidity programs, concluding that any “incremental liquidity”
could be quickly eliminated as depositors rushed out the door. Officials also believed
the company did not have sufficient high-quality collateral to borrow more under the
Fed’s mostly collateral-based liquidity programs. In addition to the  billion from
TARP, Citigroup was already getting by on substantial government support. As of
November , it had . billion outstanding under the Fed’s collateralized liquidity
programs and  million under the Fed’s Commercial Paper Funding Facility. And
it had borrowed  billion from the Federal Home Loan Banks. In December, Citi-
group would have a total of  billion in senior debt guaranteed by the FDIC under
the debt guarantee program.
On Sunday, November , FDIC staff recommended to its board that a third sys-
temic risk exception be made under FDICIA.  As they had done previously, regula-
tors decided that a proposed resolution had to be announced over the weekend to
buttress investor confidence before markets opened Monday. The failure of Citigroup
“would significantly undermine business and household confidence,” according to
FDIC staff.  Regulators were also concerned that the economic effects of a Citi-
group failure would undermine the impact of the recently implemented Capital Pur-
chase Program under TARP. 
Treasury agreed to provide Citigroup with an additional  billion in TARP
funds in exchange for preferred stock with an  dividend.  This injection of cash
brought the company’s TARP tab to  billion. The bank also received . billion
in capital benefits related to its issuance of preferred stock and the government’s
guarantee of certain assets.  Under the guarantee, Citigroup and the government
would identify a  billion pool of assets around which a protective “ring fence”
would be placed. In effect, this was a loss-sharing agreement between Citigroup and
the federal government. “There was not a huge amount of science in coming to that
[ billion] number,” Citigroup’s Kelly told the FCIC. He said the deal was struc-
tured to “give the market comfort that the catastrophic risk has been taken off the
table.”  When its terms were finalized in January , the guaranteed pool, which
contained mainly loans and residential and commercial mortgage–backed securities,
was adjusted downward to  billion.
Citigroup assumed responsibility for the first . billion in losses on the ring-
fenced assets. The federal government would assume responsibility for  of all
losses above that amount. Should these losses actually materialize, Treasury would
absorb the first  billion using TARP funds, the FDIC would absorb the next 
billion from the Deposit Insurance Fund (for which it had needed to approve the sys-
temic risk exception), and the Fed would absorb the balance. In return, Citigroup
agreed to grant the government  billion in preferred stock, as well as warrants that
gave the government the option to purchase additional shares.  After analyzing the