Here we go again:

It looks like you and me and that guy behind the tree are going to be on the hook for a few billion more dollars:

“Citigroup Inc. is in talks with federal officials that could result in the U.S. government substantially expanding its ownership of the struggling bank, according to people familiar with the situation.

While the discussions could fall apart, the government could wind up holding as much as 40% of Citigroup’s common stock. Bank executives hope the stake will be closer to 25%, these people said.

Any such move would give federal officials far greater influence over one of the world’s largest financial institutions. The proposal was made by Citigroup to its regulators. The Obama administration hasn’t indicated if it supports the plan, according to people with knowledge of the talks.

The talks reflect a growing fear that Citigroup and other big U.S. banks could be overwhelmed by losses amid the recession and housing crisis. Last week, Citigroup’s share price fell below $2 to an 18-year low. Bank executives increasingly believe that the government needs to take a larger ownership stake in the institution to stop the slide.

Under the scenario being considered, a substantial chunk of the $45 billion in preferred shares held by the government would convert into common stock, people familiar with the matter said. The government obtained those shares, equivalent to a 7.8% stake, in return for pumping capital into Citigroup.

The move wouldn’t cost taxpayers additional money, but other Citigroup shareholders would see their shares diluted.”

I don’t for a minute believe it wont cost taxpyers more money — we are that much more involved with Citi — so we would have to rescue them.

Let’s see if Rick Santelli decides to rant about this also . . .


UPDATE: February 23, 2009 5:56am

Note that the FT has a very different take on this:

Citi presses officials to take 40% stake

Citigroup is pressing the US government to agree on a new capital injection that would increase the authorities’ stake in the troubled bank to about 40 per cent but stop short of an outright nationalization.


U.S. Eyes Large Stake in Citi
WSJ, FEBRUARY 22, 2009, 8:30 P.M. ET

Category: Bailouts, Corporate Management, Credit, Politics, Really, really bad calls

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

62 Responses to “Good Money After Bad: U.S. to Up Citi Stake”

  1. Patrick Neid says:

    “Any such move would give federal officials far greater influence over one of the world’s largest financial institutions. ”

    About the same influence that the coroner has.

  2. AGG says:

    But don’t worry, Citi has just stated that first class jet travel is now a no-no.
    I’m always fascinated by this “travel” thing by execs. Do they know that tele-conferences with secure, unrecordable sessions is old hat? What’s with this person to person crap? Body language cues, sex, intimidation, bribes, what? I say if you can’t make your presentation over the net, you probably have something to hide. Lock the execs in an office and we’ll all save a lot of money.

  3. km4 says:

    > The proposal was made by Citigroup to its regulators.

    Tells us all we need to know.

    Obama don’t be a sucker… I suggest your nationalize Citi and BofA now or else this ‘$$$ sinkhole’ will be a nemesis for your progressively lowered standing over next 4 yrs.

  4. bobmitchell says:

    He already did, they didn’t give it half as much press. Then they brought him to NY a few weeks later and he was much more mild mannered after that. 5:40 in is where it really gets going.

  5. try2bamused says:

    40 percent. God, anything … anything … but (oh my faint heart) 50.1% !


    Very, very cute.

    I put the odds of this actually happening at next to zero.

  6. James says:

    I would think this would wallop the banks again tomorrow. BAC manage to come back from the Friday sell off, much more so than C. We’ll see if the confidence was short-term.

  7. Gawdfather says:

    Seeing as Santelli ranted against the original TARP bailout in September:

    I’m sure this news will qualify for some purple-faced rage (and deservedly so).

  8. RW says:

    Yves Smith at comments on some of the problems dealing with large-scale financial entities such as Citi, particularly given their widespread international, counter-party entanglements, but basically concludes that:

    “…we have two constraints, albeit both operational: a receivership for banks of this size would take longer to put into place than another cobbled together bailout package of some sort. And the power that be almost certainly do not have any sort of blueprint for how to put a major capital markets operation into some form of receivership, either mechanically or legally.

    The latter problem is an appalling, criminal lapse.”

    Santelli won’t be ranting on this specific subject you may be very sure: Bailout’s in the generic sense provide opportunities for improving advertising revenue without addressing anything really meaningful but limning specific areas such as lack of regulation, prudence and due diligence are not topics of which his corporate masters approve any more than they approve of government programs that fund mortgage mitigation when that funding should be flowing directly into their own corporate coffers.

  9. Bruce in Tn says:

    Well get out the rice bowl and the sake, we are Japan.

    If it looks like a duck and quacks like a duck…

    Robert Heinlein wrote a science fiction classic years ago..Stranger in a Strange Land…how we can have the experience of Japan to tell us that Zombie banks will crush trust in the system, and then do what we are doing…


  10. rktbrkr says:

    we’ll all be doing a Santelli rage when we see the details of this. Whats the conversion price, $10 share? They want Uncle Sap to pay 5X the market to pull up the MV (briefly?).

    We need to cut out the bullshit before we pay a trillion dollars to own a worthless bank – I mean financial supermarket.

    O’B needs to have a press conference that the next bank that calls for special treatemnt gets nationalized, do not pass go, do not collect $200billion

  11. jt-socal says:

    Must be a ploy to give them time to set up for a proper take over. Probably a good short after the pop.

  12. bobmitchell says:

    Nationalization, Bankruptcy, Conservatorship, Recievership, FDIC owned

    From the taxpayer perspective they are all the same thing. We already own it, its just a question of how much more it is going to cost. The question is who is going to try and catch them, and how they are going to pay for it.

    Given Mr. Pandit’s demonstrated financial accuity, he should not have a job anymore.

    Once they go over 80% ownership they are on the gov’t books , count on any solution to stop at 79.9 percent ownership, ala AIG.

  13. rktbrkr says:

    I assume it was the bank that floated the story. JUST SAY NO!

  14. bobmitchell says:


    I assumed that too. Que bono here?

    Citi’s stock is gonna get hammered on the news. Is that supposed to put pressure on the gov’t to act? That’s suicide poker, if it did come from citi.

    I am running it around now, seems like this is a set up for something else. What? More “announcements” to come is my only bet.

  15. rktbrkr says:

    this is funny…
    Bush: Bank system ‘basically … sound’
    By MIKE ALLEN | 7/15/08 10:37 AM EST

    Amid fears of a galloping financial crisis, President Bush said this morning that he thinks America’s banking system is “basically … sound.”

    “My hope is that people take a deep breath and realize that their deposits are” insured, Bush said at his first formal news conference since the end of April. .“I understand there’s a lot of nervousness.”

    About government assurances to shore up the massive lenders Fannie Mae and Freddie Mac, he said: “I don’t think it’s a bailout – the shareholders still own the company.”

    Bush was asked by April Ryan of American Urban Radio Networks when he expects a turnaround in the soft economy, and when it will be strong again.

    “When will the economy turn around?” he repeated. “I’m not an economist. But I do believe that we’re growing.”

  16. Bruce in Tn says:


    When you have an adoring voting public, I suppose you feel that whatever decision you make has to work.,w-obama-jesus-christ-hero-harris-poll021909.article

    Obama beats out Jesus as America’s hero

    Doesn’t mean this isn’t just more wasted time…and of course, it will create more uncertainty..

  17. rktbrkr says:

    “dangerous downward spiral”…what prudent corporate Treasurer/Controller isn’t migrating their accounts away from CITI and even BAC? Can we all squeeze into RBC and TD?

    Details of the rescue remain in flux. Key questions, such as the price at which the government will convert its preferred stock into common shares, haven’t been resolved.

    And it’s possible that other options will emerge to stabilize the company. For example, the Obama administration could decide to sit tight until the results of several new “stress tests” on major banks — broad examinations of their financial health now being mandated — are known in a couple months, one official said.

    There are at least two catalysts for the recent talks with the government.

    First, Citigroup’s shares have fallen to historic lows. That doesn’t pose a direct threat to the company’s stability. But if it spooks customers into pulling their business, that could push the bank toward a dangerous downward spiral.

  18. why average down? At this point they should just take the whole thing.

    anyone long the common stock after all this time is just gambling anyway.

    know who’s laughing his ass off right now? Chuck Prince.

  19. Transor Z says:

    @ bobmitchell: my gut says the same thing. More to come.

  20. Steve Barry says:

    In the Barron’s 2009 Forecast Poll, I picked Pandit as the CEO who would be ousted, so that’s all I care about…I need the one year subscription and lunch with Andrew Bary. My year end Dow forecast was 6100…oops, can I still lower it?

  21. Bruce in Tn says:

    More of the same…started with Bush…make a plan that the government wants and then make the states pay for it….same thing with the new stimulus….

    Handful of Governors May Refuse Federal Unemployment Benefits

    “Unemployment benefits are said to total about 2 percent of the stimulus package. Barbour said taking those dollars would force his state to eventually raise taxes when the stimulus money runs out, putting in place what he called an unfair tax on employers.

    “There is some (money) we will not take in Mississippi. … We want more jobs. You don’t get more jobs by putting an extra tax on creating jobs,” Barbour told CNN’s “State of the Union’ on Sunday.”

    Yes, fans of government…once again a national plan that eventually falls to the state WHO BY THE WAY MUST HAVE A YEARLY BALANCED BUDGET, unlike the national originator of the goofy idea…

    Unemployment insurance for part time employees? …want to bet the number of part timers goes down? Where is the keeper of the U6 crypt??

  22. Graphite says:

    We need a better word than “rant” to describe what Santelli is doing … what did they call Tom Paine’s stuff? Polemics? (Maybe that’s a distinction without a difference.)

    Santelli is downright clear-headed compared to his critics, who consist mostly of moral scolds scandalized by the idea that anyone would object to forcing everyone (those with any money, savings, or income left that is) to bail out every bad speculation of the past 5 years.

  23. Steve Barry says:

    When are they going to do a reverse split? That could fool a whole bunch of sheep into thinking it is further from insolvency. How about 50 to one and get the stock price to 100?

  24. Graphite says:


    A lot of people on the left are trying to discredit Santelli by asking “where was he when all the banks on Wall Street were getting bailed out?” It’s amazing because he was right there making all the same arguments, especially with that classic “Bait” and “Switch” sign moment. It just didn’t strike a chord and go flying around the internet the way his tea party has.

  25. Marcus Aurelius says:

    Bruce in Tn Says:

    Obama beats out Jesus as America’s hero

    Since when was Jesus “America’s hero”? Reminds me of the question in Stephen King’s “the Body”:

    Q: Who would win in a fight between Superman and Mighty Mouse?

    A: Superman, ’cause Mighty Mouse is only a cartoon.

  26. Tom K says:

    Losers average losers

  27. Avl Dao says:

    @ Graphite
    Exactly. Sadly, I guess folks feel since they didnt see Rick’s 2008 comments on YouTube, it never existed/happenned…hence the common jumping to the false conslusion that Santelli never complained before.\ or voiced opposition to govt bailouts on CNBC.

    Would not common sense suggest that not everything said by everyone on Cable TV makes it to UTube and then to ur own personal radar screen and email box?

  28. Graphite says:

    @Avl Dao

    I think it’s just another symptom of the poverty of political debate in this country right now. Ad hominem, looking for hidden biases and financial interests on the part of one’s opponents, instead of looking for strengths and weaknesses in their arguments, has become the default method of deliberation.

    Although I’m a huge fan of Santelli and heartened to see his “Tea Party” making such waves, it is curious to me that it took this long, and that it took an attack on a relatively piffling $75 billion bailout of homeowners, for him to finally “go viral.” The real people who deserve the criticism from the left are Michelle Malkin and Kathryn Jean Lopez, who weren’t even aware of Santelli’s existence while he was a one-man bailout bashing machine throughout all of 2008. Then Lopez creates that disgusting Palin/Santelli 2012 poster …

    Ah well, we can take comfort in the fact that Santelli is assuredly repulsed by the thought.

  29. Pat G. says:

    Put Citi out of its (our) misery NOW!! Nationalize the piece of shit.

  30. teraflop says:

    In my opinion, whatever amount is stated to be the public’s stake in this and like firms (too big to fail financial institutions) is merely the official recognition of what tax payers are already on the hook for.

    If the US is to take such a large stake, we need to demand an end to any and all lobbying & PAC funding from these partially/wholly-owned firms. Otherwise a “virtuous circle” will end up leaving taxpayers all wet.

  31. Mannwich says:

    @Graphite: That’s because Malkin, Lopez and other Right wing frauds are in the back pockets of big Corporate America & Wall Street and will do anything to divide Main Street to help their masters win the good fight. They’re the real elitists who love to fan the flames to divide the minions of this country. They’re simply reprising the “divide & conquer” theme they’ve played for so long leading up to their electoral disasters in ’06 and ’08. They know who their real masters are…….

  32. Mannwich says:

    The reason why Santelli’s rant “went viral” (especially on the Right), that is…..

  33. bcasey says:

    I say we invest in Gangstas, “Give me ten G’s and eleven C’s” We’d definately get more bang for the buck.

  34. Steve Barry says:

    Things are also more interconnected than we think of at first. For example, some Japanese co just went BK and they just happen to owe Citi a boatload…global synchronized bust is rolling.

    SFCG Files for Bankruptcy With 338 Billion Yen Debt (Update1)
    By Tak Kumakura and Takahiko Hyuga

    Feb. 23 (Bloomberg) — SFCG Co., a Japanese lender whose creditors include Citigroup Inc., filed for bankruptcy protection, triggering a slump in financial stocks on concern Japan’s recession will cause more corporate failures.

    SFCG, which focuses on lending to small businesses, listed 338 billion yen ($3.6 billion) in liabilities, making it the biggest bankruptcy by a publicly traded Japanese company in almost seven years. The firm owed Citigroup 71 billion yen as of July 31, according to a filing by SFCG on Oct. 27.

  35. Graphite says:


    I’m not sure it’s that simple, and your post seems to me like more of the ad hominem problem I mentioned in my earlier message. I mean, why ascribe the role of evil corporate lackey to Lopez and Malkin when they’re more likely just ignorant hacks?

    I think Santelli’s tea party went viral because bailing out an underwater home borrower is a very visceral, personal affront to those who stayed prudent and passed on the debt party of the past eight years. Hell, a lot of them even told their neighbors not to take equity out of their homes or pay bubble prices for them, and now they’re supposed to pick up the tab, just because they’re the ones who have money?! Talk about the Grasshopper raiding the Ant, with a little help from a Spider called government!

    Of course, it is certainly a huge problem that Main Street is not able to work up the same outrage over the bank bailout as it is bailing out underwater mortgages. Jim Grant had a great article in the WSJ about this a while back.

  36. AGG says:

    Hey Bruce in Tn, you need to don you “glass half full” joy of positive thinking cap and rush over to Ireland and perk up the depressing lazy butts over thar with your management skills:

    Over 100,000 protesters with an attitude problem, right?
    From the BBC:
    One protester said he was “sick and tired of the way this government conducts itself and what it’s doing to this country”.

    “I’ve worked all my life, I’ve never broke the law, never walked out on strike. Instead I’ve went to work and done my job,” he said.

    “I’ve a mortgage to pay, I’ve children to put through school, and now I’m being told I have to take cutback, after cutback, after cutback.”

    Ireland, which was once one of Europe’s fastest-growing economies, has fallen into recession faster than many other members of the European Union.

    Send the Irish some money and quit your belly achin’.

  37. AGG says:

    Graphite says, “I think Santelli’s tea party went viral because bailing out an underwater home borrower is a very visceral, personal affront to those who stayed prudent and passed on the debt party of the past eight years”.
    Not to me and I did just that. I warned people and was laughed at. So now why don’t I just toss them the bird? Maybe I will AFTER the rich fuckers who got the fees cough them up. Until then, attacking the people on the bottom is cowardice and hypocrisy.

  38. AGG says:

    Mannwich is right. Santelli’s rant is contrived.

  39. franklin411 says:

    Anyone who believes Santelli’s rant wasn’t staged is a first class, grade A moron.

    CNBC had all the “Catch Santelli’s Rant!” blurbs done the second after it was aired live. This was planned as red meat for the conservative whack-jobs to try to lure them to CNBC from the rubble that is Fox Business News. And guess what?

    You suckers fell for it.

  40. larster says:

    If Santelli was any kind of a trader, what’s he doing on CNBC?

  41. Big Tony says:

    Anyone who believes Santelli’s rant wasn’t staged is a first class, grade A moron.

    CNBC had all the “Catch Santelli’s Rant!” blurbs done the second after it was aired live. This was planned as red meat for the conservative whack-jobs to try to lure them to CNBC from the rubble that is Fox Business News. And guess what?

    You suckers fell for it.


    Santelli’s rant went mainstream b/c The Drudge Report immediately had it as its main story throughout the entire day.

    I don’t think it was staged. Santelli has been critical of the bailouts throughout the past year, and he is the only voice of reason on CNBC. You are the first class, grade A moron if you don’t know how many page views Drudge gets in a single day.

  42. TrickStyle says:

    Franklin411 – It’s not like Santelli lives inside the television. He probably rants to his colleagues all day. And when he’s really, really full of piss and vinegar, he probably tells the producer “Hey Producer, I’m full of piss and vinegar. You better make sure to give me my two minutes.” And then Producer queues everything up.

  43. Graphite says:


    I don’t really understand how a bailout of irresponsible lenders justifies a bailout of irresponsible borrowers. Could you explain it to me? In my opinion, both are acts of injustice and ought to be vigorously called into question.


    I was following the Santelli tea party stuff as it developed. CNBC put up those web pages as a response to an overwhelming response on the internet. It’s not that hard to roll out quickly, CNBC has an army of developers constantly updating its web sites, and those pages you mentioned all fit the prepackaged format that they use.

    This “Santelli’s tea party is an evil media conspiracy” stuff just sounds absolutely ridiculous. I mean, were CNBC plants the ones forwarding Santelli’s rant around on email and posting it on YouTube?


    Santelli comments on your exact question here:

    People appear to me to be grasping really hard for reasons not to listen to what Rick is saying.

  44. Graphite says:


    And another thing, this bailout of underwater mortgage borrowers is actually, in my opinion, a roundabout bailout of the bad mortgage lenders. It’s impossible to condition criticism of the one on first criticizing the other.

    Besides all that, your point is moot because Santelli’s been opposing the bank bailouts from day one.

    Cue cries of “Santelli would have us live in a Mad Max world!”

  45. Itiswhatitis says:

    “Santelli’s been opposing the bank bailouts from day one.”

    So what? Santelli’s rant just wasn’t contrived, it was made on purpose to try and re-direct more money to to the “bailouts”.

    He was used fodder.

    What he ranted over(which wasn’t much), wasn’t worth the rant that was given anymore than bigger ripoffs that had been created by the plutocrats themselves.

  46. Graphite says:


    You’re a conspiratorial nutter, you can’t even see the evidence that’s directly in front of your face:

  47. If we’re worried about lending, let’s take $50 billion and create a national credit union. Every taxpayer becomes a member and borrow at market rates. Lever it up at 12 to 1 and we’ve got $600 billion to lend. Unfortunately, I think this would reveal a little bit of truth no one wants to hear – it’s as much about loan demand as it is about loan supply.

  48. usphoenix says:

    Time magazine enlisted the Great Roubini to say that Citi only needs 22B to become well.,8599,1880499,00.html

    So who are we to believe. Is Roubini juicing his consulting practice?

  49. Graphite says:


    Unfortunately, I think this would reveal a little bit of truth no one wants to hear – it’s as much about loan demand as it is about loan supply.

    EXACTLY! The most important false idea that our policymakers are working with right now is the idea that any level of bailouts will be sufficient to reverse the psychology of deflation and its expression in asset markets. All they’re doing is tilting at windmills and racking up a tragic increase in public debt while they do it.

    Robert Prechter wrote an excellent article warning about exactly this issue back in 2004:

  50. Itiswhatitis says:

    “You’re a conspiratorial nutter”

    Please, my tagline says it all. The Plutocrats have been for years and since their current phase died in 2006(I mean, really ramping up the theft) acting on a massive theft of US treasury and raping the America population for every cent they are worth.

    They spread these intellectual nonsense theories on economics and the gods it creates that have all the answers for a utopian society.

    Who isn’t sick of that? The time is for reaction and rational thinking. Sadly, America is being fed to the wolves with this ideological bs while the plutocracy pillages.

    We don’t have the guts to do what is right to getting this country back on the right track because we are selfish and greedy. We have no morals. We have no love for this country other than making myself wealthy and oh, maybe my buds too(GWB’s beliefs to a hilt).

    Democracy is about at the failure stage for America. The capitalists are about ready to dissolve it and make us live in their global slum.

    Just as it was intended years ago no matter what Lincoln dreamed.

    Come Cincinnatus now!

  51. Broken says:

    I have been accumulating BAC again after selling off after the last run-up. My current holdings are almost a buck under water and I will double down if the price stays under $4 on Monday. Considering the state of Citi, I don’t see BAC equity being diluted more than 50%, which means $3.80/sh is quite a bargain.

    BAC Jan 2010 $5 calls were 10 cents a share on Friday? Is that right? If so, I am buying on Monday…

  52. Marcus Aurelius says:

    We already have a mechanism for dealing with the banks. It’s called Bankruptcy Court. As for those involved in the derivatives creation and trading – hedge fund managers and their ilk – or anyone else having profited handsomely from their involvement in the same, we should choose every tenth one, randomly, investigate them, try them, and publicly hang those found guilty. The bodies should hung from the light posts along Wall Street as a warning to those still in da bidness. Their widows and orphans should be left penniless. Nothing like a little Roman-style decimation of the ranks to send a clear message.

    Am i the only one still waiting for law enforcement to get involved in this mess?

  53. “One fact seems to get no attention at all: The Federal Reserve created the problems we now face.” By Bill Fleckenstein.

    “…It looks as though the Treasury is unwilling (or unable) to acknowledge that elephant in the room, which is the first variable that must be solved for if we are to move forward.

    Meantime, this issue was met head-on by Ray Dalio, the chief investment officer of Bridgewater Associates, who told a Barron’s interviewer the following:

    “What will happen to the pile of bad stuff? Let’s say we are going to end up with the good-bank, bad-bank concept. The government is going to put a lot of money in — say $100 billion — and going to get all the garbage at a leverage of, let’s say, 10-to-1. They will have a trillion dollars, but a trillion dollars’ worth of garbage. They still aren’t marking it down. Does this give you comfort?” ”

    wordpress does do a nice job communicating URLs, even if it does squash the double-space after periods (.).

    like this. as an ex.

  54. gpknopp says:

    Does it matter that I post here? Does anyone care what I have to say? These questions are like the questions I asked myself after doing business with Citibank. Their customer service at first, back when they used Americans, was horrible enough to cause my family to make a derisive joke of this company. The weeks I spent on the phone trying to make progress with them…it seems a lifetime wasted. How they insisted on sending mail to a physical address when there is no such delivery where I live. This minor issue demanded more than a year to resolve…How quickly we learned to automatically demand to only deal with an manager…

    How institutionally messed up must a corporation be to place customers, small business people, DEAD LAST in their priorities??

    At one point they outsourced their call center to India, which was for the most part an improvement, because these employees were polite, as opposed to the abusive treatment we had frequently received…but those fine folks in Mumbai could not make sense of US Postal Service addresses, which proved a weighty problem…and so after dealing with ShittyBank for far too long I was left asking myself: Does it matter if I bank here? Does anyone care if I do business with Citibank?

  55. Graphite says:

    @Mark Hoffer

    It’s amazing to me that questioning central banks and the Fed’s existence is still considered “tilting at windmills” despite their obvious role at the very center of this whole mess.

    Yeah, by all means, let’s dick around about small potato BS like regulating CDS’s, or reinstituting Glass Steagall and leverage limits, while there is this 800 pound gorilla sitting in the room.

  56. rktbrkr says:

    How about a clawback at those who sold at the top of the RE market?

  57. Graphite,

    No doubt. It’s a pathology whose virulence makes H5N1 look like it’s “for the birds”..

    Jack Nicholson well portrayed the, seemingly, apt lines that could act as fine rejoinder to the, willfully, blind among us..

  58. Greg0658 says:

    bobmitchell Says: “Citi’s stock is gonna get hammered on the news. Is that supposed to put pressure on the gov’t to act? That’s suicide poker, if it did come from citi”

    What a game.
    Knock down the company to pennies on the dollar – watch the tape and buy your company back with taxpayer dollars – while in the years and years of past you where padding your pocket while driving down your company – removing along the way all the other holders of your company.
    What a circle F**k.

    I have got to get a life now I sorta understand where this all is going … wish the WallStreet game didn’t involve me so much tho.

  59. Lugnut says:

    So, I guess it’ll only cost us around 3,300% of their market cap for a 40% stake. Sounds like a plan.

    Sold to you

  60. The rage I feel…

    .. This is how bloody revolution starts.

  61. RangerTurtle says:

    It seems that no-one wants to bail out Wall Street or Main Street, no-one wants to pay any taxes, no-one wants to lose their jobs, we all want more for less.

    WAKE UP: We have a depression starting here, and we need COOPERATION, POSITIVE THINKING, and a belief in our leadership to help us through this. If we all ‘rant’ about how a particular plan is not perfect, or about how someone’s ‘rant’ wasn’t perfect, or how one political party or other would do a better job, then we will NOT solve the problems required.

  62. rktbrkr says:

    WSJ says $7 to buy diluted $2 CITI shares. What happened to SEC running down leaks & rumors. I guess that only applies to negative leaks and rumors not leaks and rumors that that pump a dead company.

    Is this Citigroup rally one that investors can finally believe in?

    It depends on how the government ends up converting its large preferred stake in the bank to common stock.

    In a joint statement Monday, the Treasury and regulators said banks shouldn’t be owned by the government — and should have a high-quality capital base.

    For some banks, a quick way to do that would be to change government preferred shares into common stock, or, second-best, securities that convert into common stock.

    Such a move would strengthen tangible common equity, or TCE, a closely-watched measure of capital-strength. Federal officials are considering such a swap at Citi, whose shares leaped nearly 10% Monday.

    However, there would be hard choices. Assume the government wants a maximum stake of 40% in Citi’s common equity. Citi currently has 5.92 billion shares outstanding, on a diluted basis, so the government would need to add around 3.95 billion shares for a 40% holding.

    The conversion price then becomes the big issue. Any TCE boost needs to see Citi through the downturn. That could mean taking the ratio up to at least that of J.P. Morgan Chase — 3.8%. The government would need to convert $29 billion of preferreds into common equity. But to stay below 40%, would mean converting at a price above $7 per share. That would be so far above Monday’s $2.14 share price that it might be considered politically risky.

    If putting Citi’s TCE worries to rest once and for all is the government’s aim, it has two options: Owning more than half of Citi — or paying a big premium.

    Write to Peter Eavis at