Rushing to rescue Citigroup, the government agreed to shoulder hundreds of billions of dollars in possible losses at the stricken bank and to plow a fresh $20 billion into the company.

Regulators hope the dramatic action will bolster badly shaken confidence in the once-mighty banking giant as well as the nation's financial system, a goal that so far has been elusive despite a flurry of government interventions to battle the worst global crisis since the 1930s...