The weight on shareholders will be much greater now that the government has a stake in Citi. Decreased earnings of these investors could put Citi in trouble if investors decide it is no longer worth their money.
umoo.com
of MA
@
Nov 26, 2008 17:23:34 PM
the $7 billion preferred stock
The $7 billion preferred stock issued by Citigroup is actually a fee paid to the government for guarantee the debt. Unlike the $20 billion preferred, Citi will not receive any cash for this $7 billion. Therefore, citigroup will record a $7 billion expense for obtaining the guarantee from the government.
So, Citigroup paid a fee of $7 billion to government (kind of like CDS insurance policy purchased by Citigroup) and then the government used that fee to purchase a $7 billion preferred. In this way, Citigroup's capital base is artifically inflated so that Citigroup can boast its higher tier 1 capital ratio.
Another trick played out in public forum to deceive......So, depending on how citigroup recorded that $7 billion, expect a very high loss for the q4, 2008.
Kirk Shinkle is a senior editor at U.S. News. He writes daily about ups and downs in equity markets, sectors and stocks. Formerly, he covered business and economics on both coasts for Investor's Business Daily.
umoo.com of MA @ Nov 26, 2008 17:23:34 PM
vaughn of WA @ Nov 25, 2008 00:30:43 AM
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