NEW YORK (CNNMoney.com) - The U.S. government waded deeper into the bailout of one of the nation's largest banks Friday when it announced a deal that will give it control over as much as 36% of Citigroup's common stock.
Citigroup shares tumbled 46% in premarket trading.
The deal will convert preferred shares that Treasury already holds in Citigroup for common shares, a shift that is designed to improve the embattled bank's capital base, which in turn will hopefully allow it to increase its lending.
The U.S. government has already given Citigroup $45 billion, for which it received preferred shares and warrants in the company.
The new deal Friday did not give the bank any additional taxpayer dollars. But the government is taking on a greater risk by assuming more volatile common shares. The market price is well below the $3.25 per-share conversion price the government is paying.
Taxpayers will also lose roughly $2 billion in dividends, because the preferred shares they are giving up paid 8% dividends. Citi suspended its common share dividend as part of the agreement.
Welcome to the USSA! I had an account with Citibank. This morning, I'm switching it to someone else.
Obama and his administration have caused more damage to America in 30 days than Bush did in 8 years.
If you think Citi was poorly run before, wait till Charlie Rangel, Chris Dodd and Upchuck Schumer take over.
Take your money out while you can.
Ha hha ha
I've used Citi card since 1985 and never missed a payment. Last December they raised my interest rate by 6% points. I called to ask why and they said " .... to increase profitability .... ".
I have cancelled the card. How about that for profitability?
Just because of the mess that now has to be sorted out. Those fools that complain about Nationalism caused this mess mind you...
the greedy banks should close it's doors. we the people have lost all trust in these corrupt banks and most of us will never trust any of them again. they have taken our money and thumbed their noses at us. GM and CRYSLER should also have to file for bankrupsy. we americans will not buy from these two companies after what they are doing to we the tax payer and until the cars sell,they will continue to ask for the government to keep them afloat. all we are doing is keeping fat paychecks for the car co. and taking out of our pockets and we simply have nothing left!. they should be giving each one of us a new car and apoligize for their greed that got them into this mess. we are fed up with all the bailouts and all should be left to fail or make concessions to help themselves just like we are having to do.
This seems to be a bailout for Saudi Prince Walid, who I believes owns 51% of Citibank. Nothing like helping out one of their big campaign donors.
citigroup is a shame to america, they used our tax dollars for BIG bonouses, they still fly on their PRIVATE jets, while the rest of America wonders if they will have a home to go to, we wonder if we can feed our children, we wonder if we will ever have a life savings again, but they spend OUR money foolishly and then they wonder why we are so OUTRAGED!
This is so wrong !
I think the partial government control of Citi will restore confidence. As the CEO stated, "In the end, our business is about confidence." Once the confidence is back, lendng will resume. But the entire financial system needs to be restructured. This type of crisis should never happen again.
Those dividends that will no longer be paid.... they are the basis of retirement incomes of our elderly population. Obama and the government are making a shambles of this.... stock market tanking again today.
"Taxpayers will also lose roughly $2 billion in dividends, because the preferred shares they are giving up paid 8% dividends. Citi suspended its common share dividend as part of the agreement."
Some more of Obama's change by sticking it to the taxpayers. The raid on our wallets is beginning.
what does CIti do that is so important
I don't like it but understand the car makers, though we should let them fail too
But with the financial institutions, they are a dime a dozen, let'em fail, don't pander to them because of campaign contributions
If it werent for the many innocent workers employed by them I would let them fall without any chapters to hide behind.Put all the top managers in prison.
Merriam Webster's Collegiate Dictionary Tenth Edition defines socialism like this:
"Socialism – 1: any of various economic and political theories advocating collective or governmental ownership and administration of the means of production and distribution of goods
2a: a system of society or group living in which there is no private property; b: a system or condition of society in which the means of production are owned and controlled by the state
3: a stage of society in Marxist theory transitional between capitalism and communism and distinguished by unequal distribution of goods and pay according to work done."
Now will someone tell me how this does NOT describe the direction our country is now headed. We knew it would happen, and it is….don't blame me, I voted for the other guy!
I wouldn't trust the politicians in Washington DC to control anything. They prove time and time again that they're all selfish, greedy pigs and do nothing but waste our money all of the time. It's like putting the fox in change of the hen house. Stop the insanity!
Government does not know how to run itself efficiently, how in the world is government going to run banks!
Citi shares have dropped over a factor of 15 in one year.
I'd like to see the reverse of that return on the taxpayers money. That will reduce the national debt.
I'll believe that Obama is serious about catching and punishing Wall Street crooks when I see Bob Rubin in jail for what he did to Citibank.
WHY? I have yet to hear why this is good for America.
Let this bank along with Bank of America fail. No more money, no more shares, nada. Just let them fail. People need to start pulling their $$$$ out of these banks and put them in their local banks, credit unions. There are so many local banks that are doing just fine.
Citibank and Bank of America of two of the biggest contributors of this mess we are in. Enough is enough!!!!!
It's funny how the people who cry "socialism" when Obama puts money into education or healthcare are suprisingly silent when the government "invests" in a large corporate entity. Government ownership of corporations is the defnition of socialism. A government run healthcare system isn't socialism, this is.
Has any one noticed the last couple of economical reports, such as the unemployment benefits report and the quarterly GPD report has had to go back 25 and 26 years to find reports that bad.Now who was President in 1983 and 1984? The answer is Ronald Reagan (GOP God) Just saying.
Now CitiBank will raise interest rates (like all the other credit card companies are doing) to pay the good people back for their hard-earned taxes paid.