Banks Over The Cliff: Citigroup Almost Nationalized

The Wall Street Journal is reporting that Citigroup and the Treasury are in negotiations to sell up to 40% of the bank to the federal government.

This would be the first full scale capitulation of a heretofore “too large to fail” institution. Citgroup was the world’s largest financial institution in terms of deposits.

Will Citigroup be President Obama’s conduit to force feed mortgage dollars into the consumer credit market, making loans no other private sector institution would make? Incredible as it may seem, I wouldn’t be surprised to hear that idea floated in a few months.

Update:: I should have noted that Citigroup is negotiating the terms of the conversion of convertible preferred stock they have already sold to the U S government. The effect of this transaction is to make the federal government the owner of approximately 40% of Citigroup or, said another way, Citigroup is acknowledging what the market has been telling us for months.

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