In an effort to save the banking giant Citigroup Inc, the U.S. government will boost its equity stake in the bank to as much as 36 percent. This latest emergency effort will bolster the bank's capital base. This will be the US government's third attempt to prop up Citigroup in the past five months. In this attempt government will convert up to $25 billion in preferred shares to common stock. Existing shareholders could see their ownership of the bank diluted by 74%.

 

The latest rescue package does not inject more money into Citigroup. However it definitely gives the government more voting stake and far greater influence over the bank's operations that is short of an outright nationalization. Citigroup, the New York-based bank has received $45 billion of taxpayer money in October and November last year. It also received a government backstop to cap losses on $300.8 billion of toxic assets of which more than two-thirds are related to mortgages and commercial real estate.