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Updated from 2:07 p.m. EST


(C) - Get Citigroup Inc. Report

bailout by the U.S. government means that the banking giant is going to have to be more aggressive in fixing its troubles -- and that's likely to mean deconstructing its financial supermarket model.

The bank announced early Monday that the U.S. government is taking an additional $20 billion stake in


through the Troubled Asset Relief Program, on top of the $25 billion it already received, and backstopping up to $306 billion of losses in various assets.

Industry observers say that the company has minimal choices at this point.

"I believe that some of these super large financial institutions are motivated by the, 'Too Big to Fail'

theory," says Stuart Greenbaum, a finance professor and the former dean of the Olin Business School at Washington University in St. Louis. "They become too big to manage, so you have almost a contradiction here. They're too big to fail, but they're too big to succeed."

Greenbaum says Citi could "muck through just continuing doing what they're doing," including improve its risk profile and sell assets, or "tear this thing apart," by dramatically reducing its size and simplifying its operations.

"It may well be that the company is too complex and large to be well managed," Greenbaum says, adding that the government should reduce the number of institutions "for whom 'Too Big to Fail' is an umbrella."

A few shareholders have called for a breakup of Citi for years. Ex-CEO Sandy Weill built the financial supermarket a decade ago, but Citi shares have really taken a beating since the summer of 2007, when the global credit crunch first began. The credit crisis has forced Citi to most likely post a loss for 2008, due to billions in writedowns, loan loss provision expenses and cost-cutting initiatives. Citi's market cap is little more than $30 billion these days, about one-fifth of the bank's market cap from its 52-week-high on Dec. 11 of last year.

The writedowns at Citi led to the ouster of Weill's handpicked successor, Charles Prince, last November and CEO Vikram Pandit's ascension in December.

The Wall Street Journal

reported on Friday that

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executives began weighing the possibility of auctioning off pieces of the financial giant or even selling the company outright. But Pandit wants to keep the company together and is loathe to spin off Smith Barney, one of its most profitable businesses, reports have said.

Still, Pandit now has "a new shareholder -- a big one -- and he needs to be responsive to what the shareholder wants," says Bart Narter, the senior vice president of the banking group at Celent, a Boston-based financial research and consulting firm.

"Citi is a myriad of very, very different businesses," Narter says. "When you've got

multiple business units to manage, it's hard to keep your eye on them."

Narter says Citi has some "really great businesses," noting credit cards and global transaction services. But like

American International Group

(AIG) - Get American International Group Inc. Report

, Citi has "lots of businesses doing just fine and a few that generated losses way out proportion to the revenue they brought to the bank."

AIG received an $85 billion bridge loan from the government in September, as officials stepped in to help the giant insurer avoid a bankruptcy filing just days after

Lehman Brothers

was forced to do the same. The federal government has since extended its


aid package to $100 million and restructured it to better allow the company to sell assets and unwind some of its business in a more orderly fashion. The harsh original terms of the bailout threatened to put too much pressure on the company to sell assets for far below what they were worth.

The more lenient


rescue terms could give the company time to shed businesses and "focus" on a more simplified strategy, whether that's focusing on mass consumers as a retail bank or a global corporate bank, for example, Narter says.


Financial supermarket is not a good answer," he says.

But Jim Eckenrode, banking and payments research analyst at TowerGroup, says that the firm doesn't want to cut too deep or risk losing profitable revenue streams.


From Pandit's point of view, you don't want to get rid of the things that are providing some revenue for you," Eckenrode says. "But it's like with every other bank at this point -- they've got to address the weakness in the system, cut costs and ride out the storm. There are certain aspects of this business that are doing pretty well. That's really what has allowed them to make it this far."

After failing to complete a deal for


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last month, Citi looked at smaller deals for Bethesda, Md.-based

Chevy Chase Bank


Valley National Bank

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. But even those acquisitions now look unlikely, Eckenrode says.

Citi got an additional vote of confidence on Monday from Saudi

Prince Alwaleed

, one of its largest shareholders and biggest cheerleaders.

Prince Alwaleed, who announced last week that he was upping his stake in the bank to 5%, said in an interview with


on Monday that the moves made by the U.S. government for Citi will hopefully "stabilize the situation" and "improve the market perception" of Citi and other banks.

Prince Alwaleed gave Pandit his "full confidence" and said the chief executive should be given more time. He is doing a lot to have full transparency and "getting the house in order" at Citi.