The panel probing the financial crisis has zeroed in on Citigroup Inc. guarantees used to spur sales of mortgage-backed debt that ended up costing the company $14 billion.

Financial Crisis Inquiry Commission investigators may conclude that a primary cause of Citigroup's 2008 bailout was traders' use of "liquidity puts" to bolster sales, the panel's chairman, Phil Angelides, said in an interview Monday. Those puts allowed customers to sell debt securities back to the bank at face value if credit markets froze, something that Citigroup's traders bet would never happen, according to Angelides.

Instead, Citigroup was forced to buy back $25 billion of collateralized debt obligations now valued at 33 cents on the dollar as financial markets broke down in 2007, according to the company's statements. The same flawed logic pushed American International Group Inc. to the brink of bankruptcy in 2008, Angelides said. "Institutions across a broad band were guaranteeing risks that they did not understand," Angelides said.

Citi Chief Executive Charles Prince, executive committee Chairman Robert Rubin and regulators testified before the commission last week that they did not know about risks posed by the instruments. Citi's annual report for 2003 — signed by Prince and posted on the Securities and Exchange Commission's Web site in early 2004 — disclosed the risk of "contingent liquidity facilities" tied to CDOs.

Citigroup kept its liquidity puts in place even after the bank's own financial-control group wrote a memo in October 2006 saying they might lead to a "severe concentration risk," based on excerpts of the memo read by Angelides during an April 7 hearing.

"It certainly looks bad," said Andrew Davidson, president of Andrew Davidson & Co., a New York company that advises investors on the mortgage market and asset-backed securities. "The fact that they didn't know that they had this exposure, that's obviously screwed up." Citigroup spokesman Steve Cohen declined to comment.

The CDO business generated $400 million in "total annual revenue in 2005 and 2006," Nestor Dominguez, co-leader of the unit, testified at hearings last week. The revenue included fees from setting up the deals as well as profit from trading them, he said.

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