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.
I was at a Huntington Bank conference this morning. Their regional VP claimed that the feds forced them to take $1.5 billion that they didn't need. Probably a prelude to nationalization by Obama as a step toward creating his workers' paradise.
TRUTH...WHAT IS YOUR ALTERNATIVE AND DO NOT BLAME OBAMA'S ADM...THEY INHERITED THIS MESS! YOU ARE OBVIOUSLY VERY BLIND...GOVT HAS BEEN BAILING OUT CITIBANK SINCE BUSHADM...SO WHAT SUGGESTION DO YOU HAVE FOR CITIBANK...IS IT TO GO BANKRUPT OR GOVERNMENT INTERVENTION MOREOVER, ONLY 36%. YOU ALL WHO ARE LISTENING TO LIMBAUGH AND HANNITY'S RANT ABOUT NATIONALIZATION AND SOCIALISM NEED TO READ THESE CONCEPTS AND UNDERSTAD THEM BEFORE YOU WRITE OR TALK!!
You mean just like Obama just came into office after Bush? Yet, there are so many people blaming Obama for this crisis. Even though he's been in office a little over a month.
must be just OLD seniors ( like me) or people shirking thier jobs to be on here so much doing all this blogging..I have an excuse, I am a senior, too old to work, whats yours ?????? if your an "out of work " person, what you doing on here ? ohhhh, or maybe, there are a lot of "paid" bloggers on here trying to just create a revolution...??? oh well, while I'm confined, gives me something to read...
@Seattle Sue: Actually many of the economic factors are only setting records since 1996-7. If you make up your facts, you're gonna get called out on it.
And who was Pres in the mid-90's, hmmm.
Bottom line it doesn't matter what happened 10 years ago or 25 years ago. What's important is what's happening right here, right now. And in 35 days what Obama and the Dems have spent makes what Bush spent in 8 years look like chump change.
If you think all this over the top (to put it mildly) spending is good for the country, why don't you go ask your grandchildren for a loan, before the rising socialist government spend all their money. If they haven' already
Why is it that a report I just read has the Canadian banking system rated number one in the world and yesterday their charterd banks all announcing profits through the months of November,December and January.Could it have something to do with the fact that their banks are regulated.
TRUTH, That's a LIE!
You (Bush) people live in a state of abstract reality. You probably believe "ET" and "Spiderman" are real characters living somewhere out there............Come back to life and reality.
If your guru Bush had been on top of the problems in this country, President Obama would have come into Office with a stable economy. He received this miserable inheritance from your Bush. It took him eight years to do his damage. Surely you can give my President some time to undo the mess your guru has created.
Don't we make fun of countries that nationalize banks like this and other industries? Stop blaming the free market and wake up to the fact that the gov't created this mess and the gov't can't solve the problem. Let them fail and let other companies come in and snap up their market share and product better products and services.
And if Citigroup CEOs can't deal with how to run a business successfully then splt 'em up!
Makes sense. Its our money they are spending so we should have a stake in that company. They obviously ran their company into the ground so why not. Anyone have better ideas? Quit complaining and come up with a better idea. Anyone?? Anyone?? Thats what I thought.
Ronnie was president for several years by 1984. I believe he was campaigning for term two by then. If you were alive then, you might know that.
It's really comforting to know that the financial affairs of a large American bank are safely in the hands of a capable entity that has repeatedly shown us its unfaltering ability to balance budgets, account for every dollar, and set a financially troubled program back on its feet.
This was really a good call. Can we expect more from the Pelosi/Frank connection?
Well, Sue, just be patient. When things tank a little further they will be comparing the economy to the Carter years in terms of when was the last time it was so bad...
Wow, CNN, are you really that scared to clear my posts?
Patrick, Citi bank and others were encouraged by the left wing of our government to sell mortgages to people who could not afford them. The right wing did not do enough to stop them. Yes there were mistakes made by the banking industry, but laying this on thier sholders is wrong. The government caused this debockle in the first place.
I think this is genius! Of course there is risk, what else can you do? Think about what might happen to the gov't stock when this "crisis" is over. Presuming the price reaches only half of its 52wk high while Obama is in office the gov't would see 400% return or 180 billion dollars.