Citi’s largest shareholder: you
Is taking a 36 percent stake in Citigroup good for taxpayers?
Citi: Working for taxpayers now
(AP Photo / Brian McDermott)
Congratulations, U.S. taxpayers, said Karen Tumulty in Time online. “You are about to become the biggest shareholder in one of the country’s premier financial institutions,” Citigroup. The Treasury Department Friday took a 36 percent stake in the bank and will get a majority of board seats.
“Here’s the deal,” said Henry Blodget in Clusterstock. “You, the taxpayer, will be converting your dividend-paying Citigroup preferred stock into non-dividend paying Citigroup common stock.” And in a further “gift” to shareholders, you’re overpaying by about 30 percent for the common stock. Half of Citi's board gets fired, but that's “just a symbolic concession.”
The board takeover is actually a troubling development and a possible violation of shareholder rights, said Douglas McIntyre in 24/7 Wall Street. It’s also “insidious and clever” on the government’s part. If Treasury nationalized Citi, bondholders—including large insurance firms and pension funds—would take huge losses, triggering another round of bailouts.
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