US to Take 36% Stake in Citi
Treasury will take up to 40% of bank in return for boardroom overhaul
By Rob Quinn,  Newser Staff
Posted Feb 27, 2009 6:57 AM CST
Traders work at the post that handles Citigroup at the New York Stock Exchange. A new deal with Citi will see the government's stake converted into common stock at a price yet to be determined.   (AP Photo/Richard Drew)
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(Newser) – Citigroup and the federal government have reached a deal to boost the US stake in the bank to up to 40%, the parties announced this morning. The deal gives shareholders more protection, but in return, agrees to a Treasury Department demand for an overhaul of the embattled bank's board of directors. The new board will include a majority of independent directors; CEO Vikram Pandit is expected to keep his job, the Wall Street Journal reports.

Treasury officials have agreed to convert some of the government holdings of the bank's preferred shares into riskier common stock, but only to the extent that Citigroup can persuade private investors to do the same. Treasury will match private investors' conversions up to $25 billion. Despite the deal, Citi will still have to undergo the same government-established "stress tests" as other major banks to help judge its continued viability.