Citigroup Inc.'s (NYSE:C) stock is getting smacked around in the premarket -- down over 50% within 20 minutes -- as the market finds itself unable to hold its nose on the
bank's revised bailout. But beyond Citi's quickly shrinking market cap, the new strings attached to the preferred share exchange may be serving as an example of the new administration's toughening stance for other institutions in the queue for a bailout.
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With this round, Citi will not only have to convince other preferred
shareholders to convert their holdings to common equity, but also find
a stack of new board members so that a majority of the board will be comprised of new independent directors.
Uncle Sam's hand has been felt fairly heavily at Citi ever since the
government started pumping capital into it last October. Among the
moves Citi has made to defray congressional criticism include:
- participation in FDIC Chairman Sheila Bair's foreclosure-prevention program
- restrictions on executive pay
- limits on perks like private jets
- cutting the dividend to a penny
- and most surprisingly, the bank threw its support behind a bill
that would allow judges to write down the principal on mortgages, a
measure heavily opposed by the rest of the industry.
However there are some areas where the bank has held out in spite
intense pressure from Congress; most notable is the case of its
$400 million sponsorship of the the New York Mets new home, Citifield.
-
George White
See The Deal's Pipeline story on the revised bailoutSee MarketWatch story on Citi's stockSee Treasury press release
