Citigroup gets massive U.S. government bailout

* Citigroup to issue $27 bln preferred stock, cut dividend

* U.S. to shoulder bulk of potential losses, CEO stays

* Stock soars as much as 72 pct, CDS prices cut in half

(Adds analyst, White House, Alwaleed comments; updates stock)

By Dan Wilchins and Jonathan Stempel

NEW YORK (Reuters) - The U.S. rescued Citigroup Inc (C.N), agreeing to shoulder most losses on about $306 billion of the bank's risky assets, and inject new capital, bolstering investor hopes that the government will support big banks as the economy sinks into recession.

The bailout, announced late Sunday, gives the government the right to buy an equity stake, and marks its latest effort to contain a widening financial crisis that has already brought down Bear Stearns Cos, Lehman Brothers Holdings Inc (LEHMQ.PK) and Washington Mutual Inc (WAMUQ.PK).

U.S. President George W. Bush called the bailout necessary "to safeguard our financial system," and said the government would, "if need be," make similar decisions in the future.

Shares of Citigroup rose 58 percent on Monday. The price of insuring Citigroup bonds against default fell by half.

"All in all, these actions should settle market jitters surrounding the company for now," CreditSights Inc analyst David Hendler wrote.

The bailout could also boost investor confidence in the largest U.S. banks, which are expected to suffer billions of dollars in credit losses in the coming quarters.

"The government is trying to restore trust to the financial system. There are big banks that are central to the economy that the government will support," said Thomas Russo, portfolio manager at Gardner Russo & Gardner, which does not own Citigroup shares.

Bank of America Corp (BAC.N) rose 27.2 percent to $14.59, JPMorgan Chase & Co (JPM.N) advanced 21.4 percent to $27.58, and Wells Fargo & Co (WFC.N) rose 20 percent to $26.02, all on the NYSE.

The package gives Chief Executive Vikram Pandit more time to shed assets, slash payroll and boost efficiency after soaring losses from toxic debt led to $20.3 billion in losses in the last year. Analysts expect billion of dollars of further losses. Pandit became CEO in December.

Pandit "deserves a vote of confidence," Saudi Prince Alwaleed bin Talal, Citigroup's largest individual investor, told CNBC television. "I am personally committed to Citigroup. No doubt about that." Alwaleed agreed last week to increase his Citigroup stake to 5 percent from less than 4 percent.

The stock rose $2.18, or 58 percent, to close at $5.95 on the New York Stock Exchange, where it jumped as high as $6.50. The annual cost to insure $10 million of Citigroup debt against default for five years fell to about $240,000 from $500,000.