Fearing further losses, Citigroup is negotiating with the government to convert part of the public's $45 billion investment in Citi from preferred to common stock, which could give the US up to 40% of the bank at no additional cost. Such a move would boost the bank's capital portfolio while diluting the value of stock held by other Citigroup shareholders, reports the Wall Street Journal. It would also hand the government major new influence over the multinational.
It's not clear whether the potential deal—the biggest since taxpayers scooped up 80% of AIG last fall—amounts to nationalization. If Citigroup succeeds, other banks may also request public ownership arrangements. The Obama administration, which has denied interest in nationalizing troubled banks, hasn't weighed in on the plan yet. Citigroup shares hit an 18-year low last week.