"In general, the Treasury Department could have done a better job with the capital they've injected into the system" since the mid-September upheaval in the financial services sector, Knakal says. He notes that many of the banks that have gotten capital through TARP have either sat on it or used it to buy other banks, rather than to make loans. Mandating that banks deploy the funds to provide credit would be more beneficial to the system, he says.

"For every dollar TARP spends to buy bad assets, there's $1 of benefits to the system," he says. "For every dollar the program provided to make loans, there would be $10 or $11 of economic stimulus."

Knakal says it's still unclear how the funds will be used. The term sheet on the agreement, available at Citigroup's website, says the feds will take on 90% of Citigroup's losses over $29 billion from its $306-billion portfolio of mortgage-backed loans and securities. The guarantee will give the portfolio a risk weighting of 20%, thus freeing up an additional $16 billion of capital to Citigroup. The Treasury will also buy $20 billion of Citigroup preferred stock. However, Knakal says, the long-term effects of this arrangement aren't certain.

What is certain, he says, is that the feds considered it important "to keep Citigroup and its operating units [in] a relatively healthy position. This is in line with other actions that the Treasury has taken where it sees a systemic risk for the financial sector." The Citigroup agreement, Knakal says, was "very similar" to Treasury's $85-billion bailout of AIG in September.

It will be interesting to see how the Obama administration picks up the reins of the Bush administration's recent efforts to stabilize the financial sector, Knakal says. He adds that president-elect Barack Obama has emphasized capital programs and infrastructure spending as stimuli to the economy, and it's unclear how he'll deal with TARP--assuming that the program hasn't already exhausted its funds by mid-January.

Still, Knakal says it's reassuring that the feds consider Citigroup "too big to fail" and notes that the implications for commercial real estate are especially encouraging. Although he says Citigroup's announcement last week of 52,000 layoffs has been "blown way out of proportion"--most of the job cuts will take place in Asia--the New York market will be affected to some extent. Given the company's stature as a large commercial tenant in New York City and elsewhere, its guaranteed stability--at least for now--is a positive development. "Employment is the single biggest metric in commercial real estate," Knakal points out.