Fears that the US government would take control of Citi were alleviated on Friday as the bank announced that the government will exchange only part of its preferred shares into common equity. At the same time, several other holders of Citi preferred shares will also convert into common shares, thus limiting the government's stake at 36%.
The deal will significantly increase Citi's tangible common equity level -- a measure that has recently caused a lot of concern in the market -- and will do so without any further investment by the government. While this may come as a relief to US taxpayers, who have already injected $45 billion worth of capital into Citi on two...
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