Citigroup Inc.

12. FEDERAL FUNDS/SECURITIES BORROWED,LOANED, AND SUBJECT TO REPURCHASEAGREEMENTSFederal funds sold and securities borrowed or purchased under agreements toresell, at their respective fair values, consisted of the following at December 31:In millions of dollars 2010 2009Federal funds sold $ 227 $ 4Securities purchased under agreements to resell 129,918 105,165Deposits paid for securities borrowed 116,572 116,853Total $246,717 $222,022A majority of the deposits paid for securities borrowed and depositsreceived for securities loaned are recorded at the amount of cash advanced orreceived and are collateralized principally by government and governmentagencysecurities and corporate debt and equity securities. The remainingportion is recorded at fair value as the Company elected the fair valueoption for certain securities borrowed and loaned portfolios. With respectto securities loaned, the Company receives cash collateral in an amountgenerally in excess of the market value of the securities loaned. The Companymonitors the market value of securities borrowed and securities loaned daily,and additional collateral is obtained as necessary. Securities borrowed andsecurities loaned are reported net by counterparty, when applicable.Federal funds purchased and securities loaned or sold under agreementsto repurchase, at their respective fair values, consisted of the following atDecember 31:In millions of dollars 2010 2009Federal funds purchased $ 478 $ 2,877Securities sold under agreements to repurchase 160,598 129,656Deposits received for securities loaned 28,482 21,748Total $189,558 $154,281The resale and repurchase agreements represent collateralized financingtransactions conducted through Citi’s broker-dealer subsidiaries to facilitatecustomer matched-book activity and to efficiently fund a portion of thetrading inventory. For further information, see “Capital Resources andLiquidity—Funding and Liquidity” above.It is the Company’s policy to take possession of the underlying collateral,monitor its market value relative to the amounts due under the agreementsand, when necessary, require prompt transfer of additional collateral orreduction in the balance in order to maintain contractual margin protection.In the event of counterparty default, the financing agreement provides theCompany with the right to liquidate the collateral held.The majority of the resale and repurchase agreements are recorded atfair value. The remaining portion is carried at the amount of cash initiallyadvanced or received, plus accrued interest, as specified in the respectiveagreements. Resale agreements and repurchase agreements are reported netby counterparty, when applicable. Excluding the impact of the allowablenetting, resale agreements totaled $184.6 billion and $166.0 billion atDecember 31, 2010 and 2009, respectively.204