Sort Of Nationalizing Citigroup (C)

The Wall Street Journal says that the federal government is in talks to put more capital into Citigroup (C) and may end up owning 40% of the big banks.

According tothe paper, “While the discussions could fall apart, the government could wind up holding as much as 40% of Citigroup’s common stock. Bank executives hope the stake will be closer to 25%.”

The news may indicate what the future relationships of large banks and the government will look like. Instead of nationalizing the firms, the Treasury, Fed, or FDIC will take the lead in having de facto control of institutions like Citigroup and Bank of America (BAC). Common shareholders will still have stakes, but the roles of the boards that they elect will end up being largely ceremonial.

Douglas A. McIntyre