Friday, February 27, 2009

Banks Already Nationalized

Going into every weekend, there is financial talk of "nationalizing the banks" which sends bank shares down, down, down. This is ludicrious since the banks were already nationalized back in October as I wrote here. The only thing that necessarily follows is even more government control of banks:

Embattled Citigroup Inc. and the U.S. have reached an agreement in which the government will substantially increase its stake in the bank and in return will demand a boardroom shakeup, according to people familiar with the matter.

The size of the government's new stake will hinge on the amount of preferred shares that private investors, including sovereign wealth funds, agree to convert into common stock. The Treasury's stake is expected to rise to 30% to 40% of Citigroup's shares.

People who had money in bank equities, kiss it goodbye. That is, unless you are a Saudi prince or a Mexican billionaire. I am sure those guys have side deals that keep them whole.

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