Citigroup: 4 Bailout Questions

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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 5:23PM November 26, 2008

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.

vaughn of WA 12:30AM November 25, 2008