Financial major Citigroup is in talks with federal officials that may lead to the US government extending its control over the struggling bank.
Financial major Citigroup is in talks with federal officials that may lead to the US government extending its control over the struggling bank.
Quoting people familiar with the situation, the
Wall Street Journal said, "Citigroup is in talks with federal officials that could result in the US government substantially expanding its ownership of the struggling bank."
"While the discussions could fall apart, the government could wind up holding as much as 40 per cent of Citigroup's common stock. Bank executives hope the stake will be closer to 25 per cent," the report added.
The move came as Citigroup's stocks dipped below two dollar, the lowest in 18 years. It's stocks have dropped a whopping 71 per cent this year.
The report cited people familiar with the matter as saying that government would convert a substantial chunk of the 45 billion dollar in preferred shares into common stock.
The government had received those shares, aggregating a 7.8 per cent stake, in return for injecting 45 billion dollar into Citigroup.
The move wouldn't cost taxpayers additional money, but other Citigroup shareholders would see their stock diluted, the daily added.
Further, the US government's intentions with Citigroup remain unclear as it is not yet known whether it would seek a stronger hand in the New York company's management or day-to-day operations, the
Wall Street Journal said in a report published online.
Any such move would give federal officials far greater influence over one of world's largest financial institutions. Citigroup has proposed the plan to its regulators.
However, "the Obama administration hasn't indicated if it supports the plan," it added.
The report stated that Citi hopes to persuade private investors, that have bought preferred shares including government of Singapore Investment Corp, Abu Dhabi Investment Authority and Kuwait Investment Authority, to change their preference shares into common stocks to help bolster the bank's capital known as "tangible common equity."
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