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THURSDAY, NOVEMBER 26, 2009
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Citi Struggles Under Fed Oversight, About to Get More

Tottering bank may give 40% of shares to Washington

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(Newser) – Citigroup is in talks with Washington about a restructured deal that would see the US convert its 7.8% stake of preferred shares into up to 40% of common stock. The deal would provide Citi with desperately needed capital, but would place the bank under further control of the federal government. Already, reports the Wall Street Journal, Citi execs say they're hamstrung by the conflicting demands of the state and their shareholders.

There's no one entity in Washington overseeing Citigroup, and the government has flitted between micromanagement and indifference, the Journal says. The Fed claims that it now has what it calls "observer rights" that include participation in board meetings—while Citi execs complain the government now has "unlimited power" over the bank. The confusion and red tape has made Citi so nervous that, at a recent meeting, staff members worried that they'd face accusations of wastefulness for buying cookies.

Citigroup has approached banking regulators about ways the government could help strengthen the bank, including the stock conversion plan, according to people familiar with the discussions.
Citigroup has approached banking regulators about ways the government could help strengthen the bank, including the stock conversion plan, according to people familiar with the discussions.   (AP Photo/Seth Wenig)
The government could wind up holding as much as a 40 percent stake in Citigroup by converting preferred stock it has purchased in the bank in recent months into common stock.
The government could wind up holding as much as a 40 percent stake in Citigroup by converting preferred stock it has purchased in the bank in recent months into common stock.   (AP Photo/Craig Ruttle, file)
A customer uses a CitiBank ATM in Palo Alto, Calif., Tuesday, Feb. 24, 2009.
A customer uses a CitiBank ATM in Palo Alto, Calif., Tuesday, Feb. 24, 2009.   (AP Photo/Paul Sakuma)
In this Feb. 11, 2009 file photo, Citigroup Chief Executive Officer Vikram Pandit testifies on Capitol Hill in Washington before the House Financial Services Committee.
In this Feb. 11, 2009 file photo, Citigroup Chief Executive Officer Vikram Pandit testifies on Capitol Hill in Washington before the House Financial Services Committee.   (AP Photo/Haraz N. Ghanbari, file)
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3 comments
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Nwambe
Feb 25, 09 9:47 AM CST
Damn right. Don't touch anything with the taxpayer's money, Citi. Money was given to you to ensure you operate in a responsible manner. If you're not sure whether or not it's irresponsible, the safe bet would simply be not to do it. Reply
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Adapt-Overcome
Feb 25, 09 12:11 PM CST
Wouldn't it be neat if they appointed tax payers to their boards. Talk about transparency and oversight. It would actually serve them right. Especially since they were putting their hand out for tax payer money and at the same time writing checks for billions to their top executives...sounds like more than a cookie to me. Reply
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radnip
Feb 25, 09 12:33 PM CST
Citi, it's easy. Don't take anymore money, go bankrupt and hope to keep your jobs. Life is simple if you remember there's only one person's actions you can really control: Yours. Everyone else, you can only influence though the leadership effect is a bit stronger than the common person effect. Reply
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