U.S. to Raise Stake in Citigroup

The U.S. Treasury Department reached a deal late Thursday to take a stake of 30 to 40 percent in Citigroup as part of a third bailout of the embattled bank, according to several people close to the deal. Vikram S. Pandit, the chief executive, will remain at the helm, but Citigroup will have to shake up its board so that it has a majority of independent directors, a move that federal regulators had already been pursuing.

The Obama administration will probably come under intense pressure to take a much larger role in shaping the bank’s direction. Taxpayers, after pumping more than $45 billion into the bank, have become Citigroup’s single largest shareholder. The government will not put in any additional money for now, but some analysts believe Citigroup may require more down the road.

The move is one of the most drastic steps federal officials have taken to prevent the collapse of an institution deemed “too big too fail,” as its downfall could send shockwaves through the global forex trading and financial markets. The government also took a major ownership stake in the American International Group, AIG, which is already seeking additional funds, and seized control of Fannie Mae and Freddie Mac in September. So far, none of those deals have turned out well.

Read the full story ...