I'm sure it is - that is how government has been injecting capital. Instead of using TARP money to buy MBS - they are allowing companies to issue preferred stock and buying it from them.
Are you guys not reading the original text? Double-dilution whammy. The "backstop" wording is...curious. Will protect against "unusually large" losses. Here's the term sheet... http://www.federalreserve.gov/newsevents/press/bcreg/bcreg20081123a1.pdf
Hmmm... So government gets $20 billion in preferreds for injection @ 8% and more preferreds for the right to access government funds. So a good guess would be the government owns 79.9% of Citi? Similar to Fannie, Freddie, AIG, and whatever else we nationalized recently.
their earnings will be lower because of the preferred dividend. but its not a bad deal, they didnt even had warrants. its not really dilluting the common stock, its just $1.6B a year insurance program. The stock price was almost surely expecting something worse. I think C opens a good deal higher
$2.2B insurance policy - there are two sets of preferred totaling $28B - same 8% divie on each. Dividend on common is gone. What a stock does short-term on events like this is anybody's guess - but I can see precious little fundamental reason to hold the common at all. Bonds, other preferred etc, quite possibly, but I would have no interest in the common.