The Treasury has concluded its
financial/political dance with Citibank in a deal that will up the government's stake in the bank from 8 percent to 36. Today's
deal will convert the government's preferred stock into common stock at a $3.25 per-share conversion price--much higher than the market value of common shares, which dropped 46 percent in pre-market trading and now sits at $1.71. Important to note is that the government is not making a bigger financial investment in the bank, but taxpayers will lose roughly $2 billion in dividends paid by preferred stock, according to CNN Money.
Aside from taxpayers losing money, the political bottom line is that
the Obama administration has avoided acquiring a majority or
controlling interest in the bank. Which is good for them. A barometer
of reaction to the deal: the main headline on the
Drudge Report right
now makes no mention of "nationalization"--politically significant for
a major administration bank deal--but it does say "Citi in the sewer."
This article available online at:
http://www.theatlantic.com/politics/archive/2009/02/citibank-tango-ends/1055/
