Citigroup Inc., the recipient of $45 billion in U.S. government aid, is in talks with federal officials that may increase state ownership of the bank, the Wall Street Journal said, Bloomberg reported.
The government may end up holding as much as 40 percent of Citigroup's common stock, the newspaper said, citing people familiar with the situation it didn't identify.
Citigroup, which slumped 22 percent in New York trading Feb. 20 on concern it may be nationalized, proposed to its regulators that the government convert a large portion of its preferred shares into common stock in a transaction that wouldn't cost taxpayer more money, the Journal reported. Another taxpayer- funded bailout would probably cost Chief Executive Officer Vikram Pandit his job, the report said.
Banks may have to be nationalized for "a short time" to help lenders such as Citigroup and Bank of America Corp. survive the worst economic slump in 75 years, Senate Banking Committee Chairman Christopher Dodd said on Feb. 20.
Citigroup, which is trading at its lowest level in 18 years, would prefer the government stake in the New York-based company to be closer to 25 percent, the Journal said.
Bank of America and Citigroup have received a combined $90 billion in U.S. aid in four months.
The administration of President Barack Obama said on Feb. 20 that a "privately held" banking system is the "correct way to go" and House Financial Services Committee Chairman Barney Frank said nationalization ought "to be avoided."
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