Citigroup Begs To Be 40% Nationalized

[girl gone mad]

guess all the rumors were right, even down to the timing...

http://globaleconomicanalysis.blogspot.com/2009/02/citigroup-begs-to-be-40-nationalized.html

Citigroup is in deep trouble. Its share price is $1.95 and the market is recognizing what I said a year ago: "Citigroup Is Insolvent". Of course it is not just Citigroup that is insolvent, the entire global banking system is insolvent.

Nonetheless, Citigroup pretends otherwise.

Inquiring minds are reading http://www.ft.com/cms/s/0/806418a0-0140-11de-8f6e-000077b07658.html">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 nationalisation.

People close to the situation said Citi executives had been in discussions with regulators during at the weekend over a plan that would enable the government and other shareholders to convert up to $75bn of preferred shares into common stock.

According to its proponents, the injection of common stock would bolster Citi’s capital base while at the same time allaying market fears of a nationalisation. Under the plan, first revealed by the Financial Times last week, Citi could also try to raise fresh equity with a public share offering. The aim would be to keep the government stake to no more than 40 per cent or at least below 50 per cent, said people familiar with the plan.

People familiar with the plan said it would hinge on the price at which the government and other shareholders, which include sovereign wealth funds and Prince Al Waleed, convert their shares as well as how many of its $45bn-worth of shares the government converts.

Top Government Officials – who are trying to establish seeking a want a more strategic and less ad hoc response to the crisis – were and are anxious to avoid if possible the type of Sunday night crisis announcement that became a staple for Hank Paulson for ’s crisis management at the Treasury last year.

The Treasury said secretary Tim Geithner would “preserve a financial system that is owned and managed by the private sector”.

Citigroup Is A Black Hole

Citigroup is a black hole, sucking in every dollar thrown at it and it still wants more. No amount seems enough to save it. Taxpayers have already guaranteed a whopping $300 billion dollars worth of Citigroup debt. Now, two months later, Citigroup is begging for still more capital, pretending that will save it.

[creeksneakers2]

1. K & R

[lurky]

2. Only 40 percent?

I think a controlling interest would make more sense, since we have poured far more into the company than it is worth on the stock market. Then we could start firing some executives.

[girl gone mad]

3. 40%, for now.

Assuming the government would convert the full $45B into common for a 40% stake in Citi common, that would value the entire common equity at about $112B. Subtract the government's $45 billion out and you are left with a valuation of $67 billion for current shareholders. Divide that by roughly 5.5 billion outstanding shares (estimate), I come out with a pps of over $12 per share. I don't believe that a share of citi is worth that or that it will trade to that price, but my math says that is the value if the details are as such. The equity does become instantly more valuable without the overhang of $45 billion of quasi debt (preferred shares), and what would become something of a government guarantee of survival. The interest expense savings would also be very helpful to capital levels.

It's good for them, bad for us. They can hang on for a while longer.

[exboyfil]

4. Citigroup's market capitalization is $11B

Explain why we have already sent them $45B in TARP and how much else through the Fed discount window? We could have bought them 4 times now with the money already sent them.

Some quotes:

Nationalization would also jar shareholders' trust and make them loathe to invest even when the financial crisis is over. “If (the government) sticks it to the shareholders like this, you'll never raise equity again,” said Elson, who holds Bank of America shares. “The shareholders were damaged by bad management, and now they're going to be damaged by bad government.”

BAD GOVERNMENT - THE ONLY BAD GOVERNMENT HAS BEEN GIVING THESE VULTURES $45B ALREADY.

That is the point of holding equity interest - everyone knows the risk. If you don't want the risk, then buy U.S. Treasuries.

Given their low capitalization now, I really do not understand how banks can be driving stocks so much.

Why is BoA and Citibank under the same management? They did not manage risk very well at all, and the CEO and most of the top two levels of management should be gone.

[girl gone mad]

5. There's only one explanation.

Geithner won't say no to his old pals at Citi.

[exboyfil]

6. If you are right then the only thing I have to say is

The Who - Won't Get Fooled Again

Meet the new boss, the same as the old boss.

What was the purpose of the last election????

Did we just Get Fooled Again?

There's nothing in the street
Looks any different to me
And the slogans are replaced, by-the-bye
And the parting on the left
Is now the parting on the right
And the beards have all grown longer overnight

I'll tip my hat to the new constitution
Take a bow for the new revolution
Smile and grin at the change all around me
Pick up my guitar and play
Just like yesterday
Then I'll get on my knees and pray
We don't get fooled again
Don't get fooled again
No, no!

YAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAH!

Meet the new boss
Same as the old boss