Government Could Go Up to 40% Long on Citigroup

Well I guess it is time for the partial nationalization of Citi. Even though Harry Reid says it isn't nationalization but it is 11% away from that point. I have to agree with this statement as well:

“My main concern is that Washington is sending mixed signals to Wall Street, which is causing private capital to remain on the sideline," said Rep. Scott Garrett (R-N.J.), a member of the House Financial Services Committee. "Until investors are clear about the government’s intention with regard to future market interference, confidence will not be restored to the financial sector.”

They should either nationalize whatever banks that don't pass the "stress test" and get all of the blood-letting out of the way or pass a law that says the government can't take a controlling stake in a private corporation. Even telling people what happens when a bank passes or fails the "stress test" would be a step in the right direction. Instead it is a slow bleed-out and this uncertainty is just leading the market further and further downward.

The thing about Citi is that I think you might have seen the bottom now that the government might soon own 40% of their common stock and would be their biggest shareholder. The government would probably not fully nationalize it and wipe out their common stock or they end up taking a huge loss on their stake and are forced to run a massive bank.

However the government would now get a chance to call the shots at Citi. They would have the power to hire and fire the board, clawback pay, or just take a gander at their books if they want. I think that might be the next step for the government. They now get a chance to look behind the veil and try to value the toxic assets and see how bad things really are at Citi.

The problem is that the conspiracy theorist in me is thinking that now the Feds have access to all of the banking information at Citi. Think about the power that will have over anyone with deposits or has a credit card there. They can now see what you buy and when with any debit or credit card you have. Hopefully, they will be looking for purchases of bomb making materials or wire transfers to Iran and not "ideologically questionable purchases" at Amazon.