U.S. Could Expand Its Stake In Citi To 40%

[babylonsister]

* FEBRUARY 23, 2009

U.S. Eyes Large Stake in Citi
Taxpayers Could Own Up to 40% of Bank's Common Stock, Diluting Value of Shares

By DAVID ENRICH and MONICA LANGLEY


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. Citigroup has proposed the plan to its regulators. The Obama administration hasn't indicated if it supports the plan, according to people with knowledge of the talks.

When federal officials began pumping capital into U.S. banks last October, few experts would have predicted that the government would soon be wrestling with the possibility of taking voting control of large financial institutions.

more...

http://online.wsj.com/article/SB123535148618845005.html

[Selatius]

1. Maybe the federal government could force Citigroup to end its predatory credit card policies.

Like jacking up interest rates sky-high whenever a customer is late on payment. If the gov't held 40% of Citigroup, it wouldn't take the government much to stop Citigroup from doing these things. Not all shareholders are without conscience.

[truebrit71]

2. Wow...that should just about destroy the stock tomorrow...

...

[babylonsister]

3. What are the options?

I have no idea.

[MercutioATC]

13. Federalize Citi, break it up, and sell its assets off to stronger institutions.

Citi shareholders would be fucked, but investing implies risk.

[TheWatcher]

5. More than likely not.

Overnight Futures Have Blasted Of to +81, likely on this news, the EU Propaganda about "Sweeping Financial Regulations", and the Stimulus Oversight happy talk.

We'll see.

Wall Street tends to party for the darnedest reasons these days.

I believe recently there was 250+ day after the record unemployment numbers came out.

Yes, just the "Free Market" at work.

If they can pull of a miracle save in April, I will be impressed.

But as usual, Wall Street has very little to do with Main Street anymore.

It's a rigged Casino whose connection to Main Street's reality is becoming more disconnected as dislocated by the day.

However, it's good work if you can get it. It would be nice to have an "Invisible Hand" line my pockets with electronic cash between 2-4PM for absolutely no discernible reason on a given day.

As for the Nationalization possibilities, never believe anything until it is Officially Denied.

And you can't get more Official than what happened Friday.

When, not If.

[TwixVoy]

6. Wrong

The futures are up because Obama said he would work on reducing the national debt. Feds taking 40% of Citi essentially means MASSIVE dillution of the value of Citi shares. This will cause most Citi investors (the ones that are left anyway) to jump ship.

[TheWatcher]

15. The Market usually rallies on whatever the Propaganda Cover Story for it doing so is.

So that could certainly be part of it as well.

And even though you are quite correct about what that would do to Citi's Shares, that never stops Wall Street from going into Party Mode.

Friday is was the "Soothing Talk" from the White House about Nationalization. Right at 2 PM, on schedule, when the story cleared Reuters.

It almost went green, but ended up -100.

Maybe the Market thought Volcker's comments about the economy released about an hour later made more sense.

like I said, Rigged Casino.

it's getting harder and harder for them to hide the rot.

It has very little to do with Fundamentals and Technicals anymore, and much more to do with Perception Management.

But all of the artificial support and manipulation will do nothing more than stave off the inevitable.

It has not worked, and it will not work now.

As for the Overnight Party in The Futures, it's probably best to wait until 3AM to make a full judgment. That's usually when the stage gets set.

[Marsala]

4. Does that mean that taxpayers will be wiped out along with the rest of the shareholders when

Citigroup finally goes belly up? Screw that. Nationalize 'em now.

[TwixVoy]

7. You obviously don't realize what nationalize them means

and the implications of taking control of a massive financial institution that operates globally that is on its last legs to begin with. If Citi fails we will be looking at DOW 4000. Too many financial instruments are linked to them. It would cause a massive domino effect not only in the US markets but the markets world wide. Once the feds take control of them it will essentially mean Citi has defaulted on it's financial obligations world wide.

[MercutioATC]

8. Yes, it does. Common stock is worthless after a bankruptcy.

The preferred stock we're swapping, however, would still have value after a bankruptcy.

This is an abysmally stupid idea.

[leftstreet]

9. Question

This is from the WSJ article link on the other thread:

As part of the plan, Citigroup officials hope to persuade private investors that have bought preferred shares -- such as the Government of Singapore Investment Corp., Abu Dhabi Investment Authority and Kuwait Investment Authority -- to follow the government's lead in converting some of those stakes into common stock, according to people familiar with the matter. That would further bolster an obscure but increasingly pivotal measure of banks' capital known as "tangible common equity," or TCE.

The TCE measurement, one of several gauges of a bank's financial strength, gives weight to common shares -- thus the interest in converting preferred shares to common stock.

Considering what you said above...So then why would Citigroup want these shares converted to common stock?

:shrug:

[MercutioATC]

11. If the power players own common stock, they have a greater interest in keeping Citi alive.

Sure, there's the whole TCE thing too, but if the BIG money stands lo lose every dime they invested, Citi increases its chances of multiple future infusions of cash.

Good for Citi, bad for everybody else.

[leftstreet]

12. ...

Oh, duh.

Of course

[babylonsister]

16. Good for Citi? Please explain where you brain thoughts are going.

Why is this good for Citi and bad for everyone else?

[MercutioATC]

17. Sorry, I thought it was self-explanatory.

Citi would like to avoid being broken up and sold. If their REALLY deep-pocket investors (like the U.S. government) owned tens of billions of dollars worth of common stock that would completely evaporate if Citi went under, those investors would be more likely to keep pumping cash into Citi.

Good for Citi because Citi increases its chances of future cash infusions.

Bad for everybody else because they're assuming more risk...on a company that is destined to fail.

[Subdivisions]

10. Nationalize them now? What the fuck do you think a

40% stake means?!?

[seemslikeadream]

14. I know I know

:hi:

[backscatter712]

18. What the .gov should be doing is owning 51% of Citi's stock.

That way, they can throw the Davos fuckers off the board and bring that bank under sane management.

Or just nationalize them - it'd be cheaper for the taxpayers and give us the same result.

[Baikonour]

19. Only on one condition...

We get to officially rename them "shitibank."

[specimenfred1984]

20. WSJ is owned by Murdoch and is used as a propaganda front

Just like Fox News, the WSJ prints what it's told to print. Oh go ahead, don't believe me or anyone else, I'm sure you won't. The U.S. banks are already "owned" by the gov't, the gov't has propped them up with financial reassurances, otherwise the banks like C and BAC would already be out of business. Whether the gov't says they own 20%, 40% or 100% it doesn't matter, they own the banks.

The markets and banks themselves have completely lost faith in themselves and their customers don't trust them at all. The only way to restore the trust is to arrest the criminals who have committed the crimes that led to all the distrust and that includes the heads of gov't who have "deregulated" over the last 8 years along with ordering numerous war crimes and treason.

Now go ahead, post "Ugh" and pretend you know something.

[TheWatcher]

21. I feel your frustration. Most people do not want to know.

And they think that TPTB posing as their "Saviors" with their "Solutions" are good, and are more than willing to bow to whatever they say and do.

"Just Save Us. Please, just save us. Just FIX IT."

Oh, and believe me, they will.

But not like most think or want.

What they are going to "save" is their own "Status Quo" and leave the rest of us holding the bag. It is not for the greater good of us that they will "Solve" the "Problems" the System has, it is at our expense. We The People are nothing more than a means to an end to those in Power, and we will continue to be used as such until we stop going along with it.

Oh, but it's so much more fun to BELIEVE what we are told, and giggle and snicker, and mock anyone that dares shed light on any difficult truth.

Better to Shout "Conspiracy Kook!" than grasp Clarity.

With Exploding Futures and streams and confetti of happy talk being sprinkled about tonight, coupled with a Full Court Press by the Goebbels Media tomorrow morning, blasting all the way to the 4PM close, tomorrow should see another irrational, meth-induced frenzy of rallying and fierce pumping of the Markets (If we can even call them that anymore.)

And far too may outside of the Oasis of the SMW thread will look on with glazed eyes and numbed perception, and THANK GOD that the Day Was Saved yet again, and that everything is being done for the greater good.

And thus it will be, until the rot finally gives way, and there can be no more Carnival Of Stupidity.

And if they CAN'T hold this thing up tomorrow, then take that as a sign that the rot of reality is beginning to overcome the fantasy of the facade.