Feb. 27 (Bloomberg) -- The Obama administration will require Citigroup Inc. to raise private capital and make changes to its board of directors as part of an effort to strengthen the bank, according to people familiar with the matter.
The plan, which may be announced as soon as today, will involve the Treasury Department converting preferred shares into common stock. The government doesn’t immediately intend to provide additional money after channeling $45 billion to the New York-based company last year, the people said.
“This gradual step by step process doesn’t work, or has not worked so far,” said Marino Valensise, chief investment officer of London-based Baring Asset Management Ltd., who helps oversee about $45 billion for clients.
Citigroup Chief Executive Officer Vikram Pandit is trying to bolster confidence after his bank’s stock price sank below $2 last week for the first time in 18 years. The government is supporting the firm because of concern its failure might roil already weak global markets.
Federal Reserve Chairman Ben S. Bernanke said Feb. 25 he wants to avoid nationalizing Citigroup and other large banks in a way that would wipe out shareholders and leave the U.S. in full control. Bernanke said the government might end up owning a “substantial minority” of the bank. more...
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