The government decided that guaranteeing hundreds of billions of dollars in possible losses and injecting $20 billion more into Citi trumps the alternative — a panic that could leave retirement accounts and investments of millions of Americans in tatters and shove more people out of jobs.

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WASHINGTON — Taxpayers may be wondering why they’re forking over more money to rescue yet another behemoth, Citigroup, even as their own nest eggs crack and jobs evaporate.

The answer is Uncle Sam thinks letting Citi fail is unthinkable.

The government decided that guaranteeing hundreds of billions of dollars in possible losses and injecting $20 billion more into Citi trumps the alternative — a panic that could leave retirement accounts and investments of millions of Americans in tatters and shove more people out of jobs.

Whether the government’s rescue of Citigroup, announced late Sunday, will ultimately prove a good deal for taxpayers is hard to tell. In part, that’s because no one seems sure what Citi’s troubled assets are worth.

Wall Street seemed to like it Monday, with the Dow Jones industrial average vaulting over 500 points before settling up 396.97 at 8,443.39. Citigroup’s shares jumped $2.18, or 57.8 percent, to $5.95.

If the gamble pays off, Citigroup would be back on firm footing, unhinged financial markets would recover and taxpayers would turn a profit.

If it doesn’t, taxpayers would take a hit. And they would possibly have to rescue still more huge financial institutions, digging the bailout hole even deeper.

“It is way too early in this crisis to say whether it is a winner or a loser,” said Cornelius Hurley, director of the graduate program in banking and financial law at Boston University. “I don’t know if I am exhilarated by the prospect of being a shareholder in Citi or AIG. I’d rather have the money in my 401(k).”

Back in 1979, the U.S. guaranteed $1.2 billion worth of loans to Chrysler. When the struggling automaker rebounded four years later, the government reaped more than $300 million in profit.

The Bush administration has decided Citigroup, insurer American International Group (AIG) and mortgage giants Fannie Mae and Freddie Mac are indeed too big to let fail.

Yet Treasury Secretary Henry Paulson has opposed using money from the $700 billion financial bailout to help teetering Detroit automakers or financially troubled homeowners. The bailout money, Paulson has said, was intended to stabilize the fragile financial system, including major banks.

Many in Detroit resent the fact Citi and AIG received government bailout money while auto executives have been grilled, rebuffed and required to come up with plans to justify fresh federal loans.

Tim Leuliette, chief executive of auto-parts maker Dura Automotive Systems in Rochester Hills, Mich., said what the Detroit Three wants amounts to about 4 percent of the $700 billion Congress granted in the Wall Street bailout.

“I don’t think the guys from Citi were there over the weekend getting grilled when they got their $20 billion last night,” Leuliette complained.

The case for rescuing Citigroup, with its 200 million customers and operations in more than 100 countries, may be more persuasive than that for smaller banks whose reach doesn’t extend so far.

Still, the federal action makes other financial companies more likely to seek aid.

President Bush held open the prospect Monday of similar arrangements should other companies falter. And Paulson could still decide to tap the second $350 billion installment of the $700 billion package.

Treasury and the Federal Reserve are exploring using some of the bailout money to bankroll a new loan facility to help companies that issue credit cards, make student loans and finance car purchases.

Critics in Congress and elsewhere have hammered Paulson for his handling of the $700 billion bailout, especially for frequent and confusing shifts in strategy. He abandoned an initial approach to buy rotten mortgages and other bad assets from banks and focused instead on buying ownership stakes in banks.

“Paulson is doing a poor job of explaining this to Mr. and Mrs. Kettle, but it is tough to explain all of this in a sort of sound bite,” said Sean Snaith, economics professor at the University of Central Florida.

The $20 billion cash injection by the Treasury Department will come from the $700 billion package. It follows a $25 billion shot that also gave the government an ownership stake. That earlier $25 billion was part of a capital-injection program for major banks.

As part of the plan, Treasury and the Federal Deposit Insurance Corp. (FDIC) will guarantee against the “possibility of unusually large losses” by Citi on up to $306 billion of risky loans and securities backed by commercial and residential mortgages.

“An eclectic response is necessary, given how the crisis is evolving,” Snaith said. “It is like battling a virus that is mutating.”

Citigroup was hit especially hard by the meltdown in risky subprime mortgages made to people with tarnished credit or low incomes. Foreclosures on those mortgages spiked. That left Citi and other financial companies with huge losses on the soured investments.

Under the loss-sharing arrangement, Citigroup will assume the first $29 billion in losses on the risky pool of assets, which stays on its books. Beyond that amount, the government would absorb 90 percent of the remaining losses and Citigroup 10 percent.

Part of the $700 billion bailout and funds from the FDIC would cover the government’s portion of potential losses. A Federal Reserve loan to Citigroup would finance the rest.

In exchange for guarantees, the government will get $7 billion in Citigroup preferred shares.

As a condition of the rescue, Citigroup cannot pay quarterly dividends to shareholders of more than 1 cent a share for three years unless it obtains consent from the three federal agencies. The bank is now paying a dividend of 16 cents, halved from a 32-cent payout in the previous quarter.

The agreement also restricts executive pay, including bonuses. But it doesn’t get rid of Citi’s top management, as the government did with AIG.

“If you’re going to ask for a government bailout, you ought to tender your resignation,” Hurley said.