Citigroup's road to nationalization

[seemslikeadream]

http://money.cnn.com/2009/02/23/news/companies/citigroup_nationalization/

NEW YORK (CNNMoney.com) -- Citigroup may be on the verge of nationalization. But what exactly that means remains to be seen.

Those concerns flared up again over the weekend amid reports that the government was thinking of taking a much bigger stake in the beleaguered banking giant.

According to the reports, the government could convert a large portion of its preferred shares into common stock, a move that would give taxpayers as much as a 40% stake in the bank.

Wall Street seemed to embrace the notion that the government would not let Citigroup fail. Shares rose 10% on Monday. The stock is still down more than 68% so far this year though.

But assuming the government does take a bigger stake in Citi, what would be done next to try and restore the bank to health?

The Obama administration has already indicated that they have no interest in running Citigroup (C, Fortune 500) or its embattled peer Bank of America (BAC, Fortune 500). Some argue that Citi and BofA, which have each received $45 billion in funding from the bank bailout as well as hundreds of billions of dollars in loan guarantees, have essentially been nationalized already.

Experts say there are a number of options.

Conservatorship could be costly