WORLD> America
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WORLD> America
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US govt could own up to 36% of Citigroup
(Agencies)
Updated: 2009-02-27 23:08 But common shares absorb losses before preferred shares do, which means taxpayers would be on the hook if banks keep writing down billions of dollars' worth of rotten assets, such as dodgy mortgages, as many analysts expect they will. On the other hand, common stock in banks is incredibly cheap, and taxpayers would reap gains if the banks come back to health and the stock price goes up. In Washington, the Treasury Department confirmed the deal. "Treasury will receive the most favorable terms and price offered to any other preferred shareholder through this exchange," the department said in a statement. One of the hardest hit banks by the ongoing credit crisis, Citi has also received guarantees from the government that protecting it from the bulk of losses on $300 billion of risky investments. Citi has been especially hit hard by investments in the mortgage market, which began to collapse in 2007. The deal comes as Citi is in the process of shedding assets and cutting staff as it looks to reduce costs and streamline operations ahead of splitting its traditional banking businesses from its riskier operations. Last month, Citi reached a deal to sell a majority stake in its Smith Barney brokerage unit to Morgan Stanley. Citi will also reshape its board of directors, Richard Parsons, the bank's chairman, said in a statement Friday. The board, which currently has 15 members, will have a majority of new independent directors as soon as possible, Parsons added. Three board members in recent weeks have already said they would not seek re-election as the company's annual shareholders meeting in April. Two others will reach the mandatory retirement age by the time of the meeting. Earlier this month, Roberto Hernandez Ramirez said he would not stay on beyond his current term. Last month, Robert Rubin, a former Treasury Secretary who was a longtime Citigroup board member, and Win Bischoff, most recently chairman at Citigroup, both announced their retirement from the company. The goodwill charge announced Friday was added to Citi's 2008 results along with a $374 million impairment charge tied to its Nikko Asset Management unit. The charges resulted in Citi revising its 2008 loss to $27.7 billion, or $5.59 per share.
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