Citigroup to be Nationalized?

And the fun never ends:

Citigroup Nationalization: Good Bank, Bad Bank

Several sources are now reporting that Citigroup is nearing a deal with the government to create a seperate “bad bank” to house $50 billion worth of toxic mortgage and other assets, as well perhaps a $1 trillion or more in off-balance-sheet entitites. The WSJ‘s version of the story also says the following: “Under the terms being discussed, Citigroup would agree to absorb losses on assets covered by the agreement up to a certain threshold. The federal government would cover losses beyond that level, people familiar with the matter said.” CNBC adds this: The Government will absorb much of the losses for citi if there are losses and Citi would issue preferred stock to the government.” [Emphasis added.]

So far, the stock being purchased by the government hasn’t been voting stock, at least as far as I know. I’m not sure that it makes much of a difference, however. Ownership is ownership, and (certain kinds of) preferred stock can be converted to voting stock–under current law, that is, not that “current law” has any real meaning when government’s going around buying up American businesses.

Speak Your Mind

*