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.
[...]
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. A larger ownership stake by the federal government could fuel speculation that other troubled banks will line up for similar agreements.
Bank of America Corp. said Sunday that it isn’t discussing a larger ownership stake for the government. “There are no talks right now over that issue,” said Bank of America spokesman Robert Stickler. “We see no reason to do that. We believe the goal of public policy should be to attract private capital into the bank, not to discourage it.”–WSJ
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- Use the Bloomberg command
NH BLG_DEALBREAKER <GO>
to access Dealbreaker
wow, first?
this was Citi’s idea? why don’t you just ask tell all your common shareholders to get the f out
Wouldnt it make more sense for the FDIC to say, hey look market we only care about deposits and the tier 1 ratio. If they would have said this in the first place, the government would not have scared off private capital. Geithner is a complete moron saying things like we want to attract private investors and boost its tce ratio, but they say things like hey we are going to limit comp (push the most talented people to other jobs) and limit dividend to a penny. Friggin idiot, your plan has just accelerated the run on the banks (not deposits guys but stock price) forcing the govt to act which will ultimately force the nationalization of all banks….jpm and wfc own the same crap as the other banks just citi and boa are managed by less competent people. Way to go Obama, great first 100 days…ruin the global banking system which has only been around for 400 plus years. All sub/hybrid debt of financial instit. going to zero quickly.
so obv VikPa was in mexico interviewing for the minister of finance position
kudos all around to rubin
and of course – whither geithner?
It’s gonna be a fun Monday…
so I am guessing when Robert Gibbs said on Friday that the administration likes the idea of private banks, no one had been speaking to Viki?
seriously, why play this game of “the bank is still private” when the gov’t already has guaranteed 15% of the balance sheet and gave Citi the last $70 billion or so in cash? come out and nationalize the b1tch. Everyone already thinks Citi is weak (is the balance sheet really that bad tho?), so is there anything to gain by not officially singling them out???
Cheers B1tches,
The Tanned One
Tanned Banker
P.S. Bess, do you get the same market updates i get via e-mail? You were quick w/ this story!
P.S. 2. Equity Private, BHO administration is coming out this week with a plan to balance the fed budget. Knowing how much you hate them, start thinking abt why you also hate balanced budgets so you can say bad things abt them.
trial balloon
At what point do we officially consider the bank’s “nationalized”? I’m curious, does not a ~300bn backstop “nationalization” make? Where is the line drawn? Does el Presidente have to use the word verbatim, or what?
@8
Nationalization will also mean the Board and the top management is replaced by the new owners, us. See FNMA, etc.
Want to apply for the CEO spot? Or CFO?
@2
Be serious. Citi hasn’t had an idea in more than ten years.
#3: Wait, the global banking crisis is Obama’s fault now? You’re a fucking idiot.
#11…..#3 never said it was the O’s fault. He said the O’s first 100 days=Fail!!
Bottom line: No leadership. Not from government. Not from private sector. We are doomed.
JO Legal
@12- he said “Way to go Obama, great first 100 days…ruin the global banking system which has only been around for 400 plus years.”
ie he or she @3 is a complete moron.
#12 here….We are about to see the biggest class warfare in the history of America. Get ready!!!!!!!!
You bitches that voted for the O are going to be soooo super sorry!!
Popcorn Please!!!!!!!!!!!!!!!!!!!!!!!!!!
#8, It is all according to how things are “spun”.
I didn’t want to watch the oscars anyway…we are witnessing the banking version of the real word: this is what happens when the government stops being preferred…and starts being real common. did the current common holders really think they had a chance after the pfds got injected into the banks formerly known as “too big to fail?” at this point it’s unclear how far up the cap structure you have to be to come out whole, but one thing is clear: there will be large sell orders going out in the am for c, bac, and wfc. for some reason jaime d has received a hall pass (I’m not advocating that he should). let’s move on from “who’s the next bank to fail headlines” and just drop all the preferred down to equity. perhaps then, we could get to the task of moving out of this morass…
before people get all bunched up about looking at the tce ratio – ask yourself this: of the $9 billion wells added to goodwill (13% of common equity) from the acquisition of watchovaya, exactly how much of that can be used to service debt or preferred interest should the bank lose money again next year? tce is about real hard capital.
@12
One hundred days haven’t passed. Plus he got a ruined system to begin with. However, he better take out Summers and Geithner of their ideological bind. We can’t afford to continue GOP policies if this is going to get fixed.
“BHO administration is coming out this week with a plan to balance the fed budget. Knowing how much you hate them, start thinking abt why you also hate balanced budgets so you can say bad things abt them.”
False. False. And… false. They are coming out with a plan that is supposed to half the deficit. Not hard considering what was spent last year. This is like Hertz claiming that 50% revenue increases are amazing (a year after 9/11).
Pity such things impress you. How’s the Kool-Aid taste? (It’s not laced with anything, is it?)
@15
I hear many douchebags like you proclaiming class warfare. On which side of the war are you are going to be? I’d like to make sure the other side takes you out quick.
@18…This is not a GOP or DNC problem. You helped, I helped, Joe Six Pack, all helped create this monster.
The O is not the man for the job. Not saying I know who the man for the job is. I just know I wake every day wishing all current leadership would resign. We need new blood. Fast!!!!!!!
This doesn’t make sense. If BAC is in talks to do that, wouldn’t releasing a statement saying that you aren’t be a big no-no? If I did something like that, legal would go absolutely batshit.
@19
Do you hate balanced budgets or not?
@20…. The side that is right!
@21- your use of multiple exclamation points has the same effect as when people comment in all caps– it helps us to identify you as an idiot not to be taken seriously.
@22- well, then I guess you should assume that they’re NOT in talks to do this.
#12, I think I know you.
@25=Richard Head
“Posted by guest, Feb 22, 2009 10:27PM
@19
Do you hate balanced budgets or not?”
I love balanced budgets. We aren’t going to get one under BHO.
#26 hello
@24
In a war the soldiers always need to believe their side is right. So you know your side but don’t want to say it. Coward.
EP, I just say mean things like that to get you to talk to me. If you just called me already (I will pay for 1st date) we could stop all this back and forth on here.
Tanned Banker
@tanned – are you in chicago? that could be an expensive proposition…
@30…. Guess
Hey EP – I heard about the Obamas adopt a puppy. Please write a scathing, sarcastic article showing us all why puppies are evil.
citi is like an airplane without a partner…
that was for you 1-2.
99 Decision Street.
99 ministers meet.
To worry, worry, super-scurry.
Call the troops out in a hurry.
This is what we’ve waited for.
This is it boys, this is war.
The president is on the line
As 99 red balloons go by.
we have $45 billion in citi preferreds. how much of that gets us 40% of citi’s common?
The Best Ron Paul Interview I’ve Seen. From Bill Maher’s HBO show friday night:
http://bit.ly/or2h7
runs about 6 minutes.
@19/EP @ 28
While GWB brought us the miracle of lower taxes and higher government spending, Obama promises to bring us the likewise impossible dream of higher taxes and lower spending (despite promising higher spending, yea, wrap your head around that).
Asian Stocks, U.S. Futures Advance on Citigroup Speculation .. According to the bloomberg. The markets like the idea so far. Also, since this had no play on dealbreaker:
Bank of America Makes $402 Million TARP Dividend Payment to U.S. Government
2009 Dividends to Government Will Total Approximately $2.8 Billion
PR Newswire
CHARLOTTE, N.C., Feb. 17
… translates to GOVT INVESTMENT (NOT COMPLETE BAILOUT) IN BAC IS BETTER THAN MOST INVESTMENTS THESE DAYS.
Has C made any dividend payments on the govt’s pfds yet?
Welcome to the USSA B1tches
@35, I just laughed out loud… been awhile since I have seen that joke… That one was a classic…
Having said that… I have said worse… way worse.
~SEG
Life is imitating art at the moment, in a Mel Brooks format. I just keep waiting for the Presidential camera moment where we hear a classic line like…
“… Where are the white woman…”
@41
Did you produce this?
http://www.youtube.com/watch?v=NYZDDSTsomE&NR=1
“The move wouldn’t cost taxpayers additional money”
I guess if you don’t consider forgoing future income a “cost”. Instead of preferred with a contractually-guaranteed dividend, taxpayers get soon-to-be-worthless common.
Does Erin Burnett’s ex/boyfriend still work at Citi?
No money, no honey!
@34 I’ll hazard that she’s seething over the fact that Obama plans to tax carried interest as income rather than as cap gains.
EP: How much did the Bush Administration, over its 8 years (including six with Republican control of Congress) reduce the deficit? Lessee…they started with a surplus from Clinton…
“EP: How much did the Bush Administration, over its 8 years (including six with Republican control of Congress) reduce the deficit? Lessee…they started with a surplus from Clinton…”
Sorry, what does this have to do with Obama’s nonsense plan?
It’s amusing that the universal response to “Obama’s plan is bullshit” is “SO? Bush was an idiot too, so there!”
As if this bears at all on the big lie dusted with a light sprinkling of fairydust that is the present administration. As if I’m a Bush fan, or something.
Grow up.
Okay, how about “It’s a mediocre plan that only manages to let Bush’s cuts expire and attempts to rein in spending, but look at the alternatives:
a) McCain offered 300bn in tax cuts to top off making Bush’s 350bn permanent, claiming a fictitious balancing through “getting tough” on unspecified defense programs and Medicare
b) Congresh’nal Republicans want to cut capital gains and the top marginal tax rate to… stimulate the economy? The budget will balance itself. It’s great for me (in the short run), but it’s shitty as fiscal policy and ignores the holy grail of tax-cuts-cum-stimulus: the investment tax credit.
c) Congresh’nal Democrats… let’s just say that only the Blue Dogs holding a lot of marginal seats and Obama’s demonstrably-scanty influence over Congress to finally bring paygo back despite Pelosi and Reid’s spendthrift natures.
So in the hideous field of political economy, what plausible alternative is remotely as good as, let alone better than, Obama’s plan. It’s a pretty bleak competition.”
Of course, comments calling the Obamanauts propagators of a big lie suggest that my effort’s wasted.
Again, you are presenting a logical fallacy. Other hypothetical plans that never saw the light of day are straw men. Your standard for this plan appears to be “It’s somewhat better than Bush and Republican plans.” That is no standard at all- as you yourself admit.
This is the big leagues. If these people can’t come up with something better than pushing massive spending programs like Universal healthcare after record deficits, all the while calling urgently for a return to fiscal discipline, then they need to step aside. Period.
Bet all the other candidates are breathing a sign of relief that they aren’t the prez. Maybe the mess was so giant that Mr. Arizona told us that “the prez would make a great prez” cause he wanted to throw the election away from himself.
@46, the “Clinton surplus” is a myth:
http://www.craigsteiner.us/articles/16
The DotCom meltdown wasn’t a myth, though.
EP = Ann Coulter. You’re not from CT too are you?
funny how the obamaidiots forget that the trillion dollar porkulus bill is not counted in the budget….balance budget my azz…..
“Posted by trojan, Feb 23, 2009 3:46AM
EP = Ann Coulter. You’re not from CT too are you?”
All you’ve managed to do here is demonstrate how completely ignorant of my politics you are.
When does EP sleep?
Plenty of time for sleep when you’re dead.
@39 – the BAC dividend payment to the gov’t was made from capital loaned to BAC by the gov’t, not earnings.
Himmler has issued a directive: Do not criticize Ann Coulter. You can do it from the Eastern Front if you wish.
EP says Bush is an idiot. I agree.
However, Obama is no idiot. If EP thinks so, then EP is the idiot.
President Obama is going to take care of all this stuff. No need for us to worry about it. He still has quite a ways to go to reach 100 days. :-)
lighten up ice queen, its called sarcasm
The government needs to buy at above market prices. How else will you get private investment along with public funds? Why would you own a single banking stock if the government will dilute you?
Buying C common stock at above market prices would inflate the value of Citi – in this market the biggest fear is deflation.
The market didn’t “cheer” when LEH went under – it tanked. The market won’t cheer when shareholders equity is futher diluted through nationalizations or what ever you want to call them.
The more politicians get involved, the worse off this gets. Some called for the US Treasury to remind investors about moral hazard; so they let Lehman file for bankruptcy and credit markets froze, causing massive damage to the economy. Now, others call for nationalizations and the market reacts accordingly (last couple of weeks have been ugly).
The Fed was set up as a lender of last resort, to restore confidence and ensure functioning markets. Now, the U.S. Gov’t must be a buyer of last resort. There is no confidence in the market, and until the Gov’t steps up and acts in shareholders’ interests, there won’t be. And the taxpayers will pay. But after all, if we as a whole don’t believe that these are sound investments, why should individuals buy them?
s7ENEX I really like and appreciate your article.Thanks Again. Really Cool.