Friday, February 27, 2009

More Citi

Remember back when the government backstopped $350,000,000,000 worth of bad Citi debt (i.e., the return on the sales on that debt are guaranteed by the government, i.e., the holders of bad Citi debt got to switch their crappy Citi debt for U.S. treasuries) and in return we got a paltry $7,000,000,000* worth of preferred shares in bank that should be bankrupt? The out used by Washington was that they were 'preferred shares' so the taxpayers would get a guaranteed dividend and the taxpayers would be first in line for the assets if the bank went under.

From WSJ:
Separately, Citigroup announced it will record $10 billion in write-downs for the fourth quarter, boosting the year's net loss to $27.7 billion. Citi is also suspending dividend payments on common shares, which had already been slashed to 1 cent a share per quarter.
So unsurprisingly Cti doesn't have the cash for the dividend (or much else, except enviro BS), so the government is going to convert a fair portion of their/our shares to common stock. In order to keep government ownership under 50%, they're going to do it at an artificially inflated price of the common stock, so we're all losing money on the deal despite what the news says.

*These numbers are all over the place, so apologies if they're wrong.

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