`US Gov`t Considers Buying Stakes in Citigroup`

The U.S. government is considering taking a stake of 25-40 percent in Citigroup, the Wall Street Journal said yesterday.

A Citibank source said the discussions could fall apart but that Washington could own as much as 40 percent of Citigroup’s common stock. Bank executives said they hope the stake will be closer to 25 percent.

The daily said the government is negotiating with the bank to convert Citigroup’s preferred shares bought by the government twice since October last year into common stocks. In other words, Washington, which injected 45 billion U.S. dollars (67 trillion won) equivalent to 7.8 percent of the group’s preferred shares, wants to convert the shares into common stock.

Washington would hold 25-40 percent of Citigroup’s common stock depending on stock price. Details of the negotiations including state intervention have yet to be released.

As rumors last week said the government will nationalize Citigroup and Bank of America, their share prices collapsed.

The Wall Street Journal also said the White House has dismissed speculation that the government is preparing to nationalize several large U.S. banks.

Bank of America also said it had not negotiated with the government.

The New York Times also said yesterday that the government and Citigroup will negotiate over bigger ownership, adding the government will take a hard look at the financial condition of the 20 largest U.S. banks.

Under the plan, the U.S. government will use computer-run “what-if” situations to estimate what would happen to each bank under Depression-like conditions.

The New York Times said Washington is highly likely to conclude that large U.S. banks need additional public funds and accordingly own bigger stakes in them.

will71@donga.com