The federal government agreed Sunday night to rescue Citigroup Inc. by helping to absorb potentially hundreds of billions of dollars in losses on toxic assets on its balance sheet and injecting fresh capital into the troubled financial giant.

The agreement marks a new phase in government efforts to stabilize U.S. banks and securities firms. After injecting nearly $300 billion of capital into financial institutions, federal officials now appear to be willing to help shoulder bad assets, on a targeted basis, from specific institutions.

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