Government will guarantee losses on more than $300 billion

[Bindare_Dundat]

in troubled assets and make a fresh $20 billion injection.

NEW YORK (CNNMoney.com) -- The U.S. federal government on Sunday announced a massive rescue package for Citigroup - the latest move to steady the banking giant, whose shares have plunged in the past week.

The plan has two key features:

First, the U.S. Treasury and the Federal Deposit Insurance Corporation (FDIC) will backstop some losses against more than $300 billion in troubled assets.

Second, the Treasury will make a fresh $20 billion investment in the bank. The government has already injected $25 billion into Citigroup as part of the $700 billion bailout passed by Congress in October.

[Hedgehog]

Letting Lehman brothers fall was the big mistake that made this into a world financial crisis.
Fed banks and governments needs to intervene and do it with force to avoid banks to fall.     

[Bindare_Dundat]

Letting Lehman brothers fall was the big mistake that made this into a world financial crisis.
Fed banks and governments needs to intervene and do it with force to avoid banks to fall.     

How did letting that one bank fail cause a world wide financial crisis?

[Hedgehog]

How did letting that one bank fail cause a world wide financial crisis?

Many international banks had interbank loans with Lehman. So when they went down, it hurt the liquidity of those banks.
The Lehman crisis hurt the whole American banking system in this way, the other banks had loans and securities in Lehman.
So when Lehman went down, the US market froze up, and also spread into other sectors.
Best thing would've been if the government would've moved in and completely took over Lehman for a brief time and sold off the shares after a few years when the liquidity in the bank was taken care of.
This is how the banks in Sweden were saved in the early 90's. UK has done the same for some of their biggest banks, which has prevented a major economic crisis in UK so far.