Pandit about to get new boss?

[GRG55]

Nationalization, here we come.

Finally...

U.S. government seeking up to 40 pct stake in Citigroup: report

Sun Feb 22, 2009 8:58pm EST

HONG KONG (Reuters) - The U.S. government may end up holding as much as 40 percent of Citigroup's common stock, the Wall Street Journal reported on its website, citing sources familiar with the plans.

Citigroup executives are hoping the talks with U.S. federal officials will result in a stake closer to 25 percent, the Journal reported...

[Chomsky]

Re: Pandit about to get new boss?

This article says that no more capital would come from the government, just that its stake would increase to 40% via existing shareholder stock dilution.

http://online.wsj.com/article/SB123535148618845005.html

How does this change anything?

[cjppjc]

Re: Pandit about to get new boss?

This article says that no more capital would come from the government, just that its stake would increase to 40% via existing shareholder stock dilution.

http://online.wsj.com/article/SB123535148618845005.html

How does this change anything?

Doen't this lower the chance of nationalization, or bankruptcy?

[GRG55]

Re: Pandit about to get new boss?

This article says that no more capital would come from the government...

For now...:rolleyes:

...just that its stake would increase to 40% via existing shareholder stock dilution. How does this change anything?

It has to do with the way the rules treat different classes of shares towards the bank's capitalization.

It probably also sets Citi up to reduce or potentially eliminate payment of the modest preferred share dividend that Hank negotiated on behalf of the US taxpayer.

Doen't this lower the chance of nationalization, or bankruptcy?

The US taxpayer has already pumped $45 B into this "bank" and is guaranteeing the losses on more than $300 B of toxic crap. It's already been nationalized for all intents and purposes. It's just been done in a way to make sure the US taxpayer gets screwed again and again on the valuations it's forced to buy in at.

The taxpayer has already pumped enough money into the banking system to buy out all the banks several times over. So what does it have to show for it? I continue to be amazed at the concern being expressed for the existing shareholders in these completely insolvent enterprises. They should have been wiped out months ago.

[cjppjc]

Re: Pandit about to get new boss?

What I was asking is doesn't this lower the chance of the stock going to zero? Wont the Govt not allow the loss of all the capital pt into this company?

[GRG55]

Re: Pandit about to get new boss?

What I was asking is doesn't this lower the chance of the stock going to zero? Wont the Govt not allow the loss of all the capital pt into this company?

I'm sure this is part of the reason Citi is proposing this.

However, unless it is prepared to buy up every share on the market, the government cannot guarantee the price that the shares will trade. There's no reason any shareholder cannot offer up a board lot in Citi to fill a bid at half the 52 week low. What's the government going to do? Send in the PPT to bid higher?

There would not appear to be any real [e.g. positive] shareholder equity left in any of these "banks". Whatever the common is trading at now is simply based on speculation.

[cjppjc]

Re: Pandit about to get new boss?

Thank you.

[GRG55]

Re: Pandit about to get new boss?

Thank you.

Some additional commentary from a number of analysts, on Reuters:

INSTANT VIEW: Citi in talks to hand big stake to U.S. government

Mon Feb 23, 2009 8:34am EST

...The report comes amid heavy selling of U.S. bank shares last week on fears the U.S. government may be forced to nationalize some ailing banks to stave off further damage to the economy.
Below are analysts' comments on the report.

KU YONG-UK, ANALYST, DAEWOO SECURITIES, SEOUL
"For the government to take on a stake in a bank would mean the government itself would like to resolve fundamental problems at the bank.
"But that may precede a capital writedown. We need more details on what the government will mark as losses for Citi before it buys a stake."

SEAN CALLOW, CURRENCY STRATEGIST AT WESTPAC, SYDNEY
"(The report) is definitely drawing much interest, supporting S&P futures and also Asian FX.
"It seems markets are taking the story on face value and pricing in the U.S. government not fully nationalizing banks. Whether that ends up proving to be the case is very debatable, but for now it is helping broad risk appetite and thus weighing on dollar/Asia FX, pushing Treasury yields higher."

More...

[GRG55]

Re: Pandit about to get new boss?

Courtesy Jesse's Café Américain...

[ocelotl]

Re: Pandit about to get new boss?

I remember having seen this, regarding Citigroup and its subsidiary Banamex here in Mexico:

Citigroup’s Banamex Says It’s Not for Sale

February 17, 2009, 7:13 am

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The head of Citigroup’s Mexican bank on Monday denied reports that the troubled U.S. institution plans to sell Banamex to streamline operations and pare losses at home.
Banco Nacional de Mexico, known as Banamex, is part of Citigroup’s ‘’strategic plan” for the future and will maintain lending levels despite Mexico’s slowing economy, the bank’s chief executive Enrique Zorrilla told reporters.

Continue...

According to Mexican Law, no foreign government can have direct ownership on a bank stablished in Mexico (at leasty openly), so Citigroup would have to sell Banamex in the moment the nationalization is made public.

In any case, it shouldn't be bad for Accival group, the mexican coowners of Banamex to prepare hoarding funds if the nationalization turns out to be true.

[GRG55]

Re: Pandit about to get new boss?

Courtesy Jesse's Café Américain...

Some very interesting [actually, horrifying wouldn't be too strong a description] discussion going on about this topic on Yve Smith's blog...

http://www.nakedcapitalism.com/2009/...t-results.html

and

http://www.nakedcapitalism.com/2009/...game-nigh.html

[FRED]

Re: Pandit about to get new boss?

Some very interesting [actually, horrifying wouldn't be too strong a description] discussion going on about this topic on Yve Smith's blog...

http://www.nakedcapitalism.com/2009/...t-results.html

and

http://www.nakedcapitalism.com/2009/...game-nigh.html

We get accounts like this but do not publish them if we cannot verify them.

[c1ue]

Re: Pandit about to get new boss?

GRG,

While I am in complete agreement that the way this latest round of the 'financial crisis' is being handled is very shoddy, I did want to point out that what Citi is going for isn't propping up its share price.

What Citi is going for is maintaining the highest levels of present ownership while still sucking in massive taxpayer dollars.

As I've noted in other threads, the game at this point isn't about the market cap, it is about control and share of the company with an eye toward survival and eventual rebound.

Even excluding the Rubin/Summers/Geithner gang, we're also talking China, Alwaleed, and any number of other 'interested parties'...