US Seeks Up to 40% Stake in Citi, FUTURES turn higher

Discussion in 'Wall St. News' started by S2007S, Feb 22, 2009.

  1. S2007S


    Another joke, seems everytime we get some sort of news about propping up these failing banks the markets turn positive and fade towards new lows. This is just getting pathetic, how much time, effort and trillions of dollars are they going to throw at these failing banks. They say it isnt nationalization, you would have to be a fool to believe it isnt. Its getting quite old, tonight the futures were down and as soon as this news was out futures turned on a dime. Who knows what happens between tonight and tomorrow morning but if we get a bounce its just an opportunity to sell once again.

    US Seeks Up to 40% Stake in Citi; Futures Turn Positive

    Companies:Bank of America Corp | Citigroup Inc
    By: | 22 Feb 2009 | 09:57 PM ET

    A number of media outlets are reporting that the U.S. government may end up holding as much as 40 percent of Citigroup's common stock. This would be a result of the government's latest cash infusion into the beleaguered bank.

    Colin Robertson

    The Financial Times reports that Citi 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 percent but stop short of an outright nationalization.

    Separately, The Wall Street Journal reported on its website that Citigroup executives are hoping the talks with U.S. federal officials will result in a stake closer to 25 percent.

    These reports helped Asian markets pare back losses in the Asian morning session Monday. U.S. equity futures also turned positive, the euro strengthened and Treasuries fell, after the reports hit the market. S&P 500 futures were up 0.9 percent and Dow futures rose 0.7 percent. The benchmark 10-year yield ticked up to 2.82 percent from 2.79 late on Friday.

    A Citigroup spokesman in Hong Kong declined to comment.

    At this point of time, Citigroup does not know how much money it is getting from the federal government. However, if you compare Citigroup's market capitalization with the number of preferred shares the government currently owns, if these shares were converted right now,
    they would worth more than 100 percent of Citi's total market capitalization.

    Any additional monies that Citi receives from the government, automatically means a further stock dilution. While the Obama Administration says this isn't nationalization, markets are taking it at face value -- if it looks like a duck, walks like a duck and quacks like a duck, it is a duck.

    The U.S. government will probably be the biggest shareholder of Citigroup, owning a majority of its stock. This is de facto government ownership, or nationalization. What this ownership means at this point, nobody knows.

    Citigroup officials also hope to persuade private investors that have bought preferred shares -- including the Government of Singapore Investment Corp, Abu Dhabi Investment Authority and Kuwait Investment Authority -- to also convert their preferred shares into common stock, the Journal reported.

    Citi could also try to raise fresh equity with a public share offering, the FT said. The aim would be to keep the government stake to no more than 40 percent or at least below 50 percent, it said, citing people familiar with the plan.

    The euro jumped to the day's highs against the dollar [EUR_TN Loading... () ] and the yen [$$EURJPY 119.76 0.04 (+0.03%) ]. The euro climbed 0.5 percent to $1.2883. Against the yen, the European currency rose 0.6 percent to 120.17 yen.

    The Journal also said that the Bank of America [BAC 3.79 -0.14 (-3.56%) ] is not discussing a larger ownership stake for the U.S. government.

    Citi stock [C 1.95 -0.56 (-22.31%) ] has dropped 71 percent so far in 2009.
  2. [​IMG]

    Is this coming from TARP 1 / TARP 2 money. If so then I'm glad because it's better burnt on Citigroup then another bailout for GM.
  3. Of course it's not.

    It's pre-privatization.
  4. These banks are so insolvent, they actually don't want to know the negative value of the assets on their books.

    They literally don't want to know.

    The several hundred billion they received from the taxpayers just fell into this extremely deep well that goes on forever and forever, and no one could even hear the splash.
  5. I don't blame them. This whole mess started with the mark to market accounting rule enforced on mortgage backed cp. If that rule was not enforced, this major global recession/depression would not have occured the way it did. I am not saying it's right but really, which bunch of scum bags decided enforcing the mark to market rule to these trillions of toxic crap was a good idea in the first place? Until government or the banking sector explains to me why this rule was enforced the way it was which was directly related to the failure of the global financial system, I will believe the conspiracy theorists before anyone else, because quite frankly it's this sort of completely irrespobsible action that supports these conspiracies.

    EDIT, as far as the big picture of all of this is concerned, the only way to finally put this mutli trillion dollar toxic debt to rest for good is to either
    A) change the accounting rules and create some sort of system that revalues these securities and then trades them AFTER the housing markets have stabilized.
    B) Bush the big reset buttom and create new currency systems and allow everything to default. But this creates a whole new set of problems and conspiracy theories.

  6. WHY! Do people think mark to market is the problem?? WHY!
  7. Couldn't agree more with you! The people complaining about "mark to market" must not understand that the problem is the crap that is being evaluated and NOT the evaluation!!! It seems like the old gov't creed, "A problem delayed is a problem solved" - but that is not reality! Those against mark to market seem to think the toxic crap will go away.....with the mystical, "If we just wait long enough" To the mark to market critics, I ask, "How the hell can you tell the value of a company, if they do not perform mark to market? You think the gov't should invest in the banks? How much should they invest...if they can't tell the value...because you don't want mark to market???"

    As to the OP - I agree - who the hell thinks the gov't taking over the banks is a good thing? It must be an "already priced into the market" thing or the PPT playing again, 'cause this ain't nothin' but bad news (written in slang for humor in the face of such bad news)!

  8. Mark-to-market was what the TRADERS wanted as it was how they got paid the big bonuses for the big paper profits.

    It wasn't until bonuses became dependent on TARP rather than on positive-expectancy positions that "mark-to-market" became a bad word.