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Fallout: The Financial Crisis

Government could own more of Citi

Dan Grech Feb 23, 2009
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Fallout: The Financial Crisis

Government could own more of Citi

Dan Grech Feb 23, 2009
HTML EMBED:
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TEXT OF STORY

Renita Jablonski: C is for Citigroup. C is also for common, as in common stock. The Wall Street Journal reports this morning the government may end up holding up to 40 percent of the company’s stock. Marketplace’s Dan Grech has more.


Dan Grech: If the government were to buy up Citigroup common stock, that would shore up the bank’s wobbly finances at a critical moment. The Federal Reserve is expected this week to perform a battery of stress tests to gauge the financial health of U.S. banks.

The money for the government stock purchase would come from the $45 billion in bailout funds already committed to Citigroup. That means it wouldn’t cost taxpayers any extra money. On the losing end: Citigroup’s current shareholders, whose ownership in the company would be diluted.

But banking consultant Bert Ely says even shareholders could benefit from this deal:

Bert Ely: Better to own a piece of something that succeeds than to own an even larger piece of something that fails. And that’s why they almost have no choice but to go along with this.

Federal officials didn’t confirm their plans for Citigroup this morning. The government says it will unveil its revamped program to help troubled banks later this week.

I’m Dan Grech for Marketplace.

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