The Financial Bailout Fiasco

Both AIG and Citigroup get the federal government to agreed to pour in more money $30 Billion for AIG and for Citigroup a preferred to common stock swap that could lead to up to a 36% taxpayer stake.

NEW YORK, March 1 (Reuters) - The board of American International Group Inc (AIG.N: Quote, Profile, Research) approved a revised bailout package for the troubled insurer that includes an additional commitment of $30 billion from the U.S. government, a source familiar with the matter said on Sunday.

The board met earlier to vote on the deal, which also includes easier terms on a government credit line and preferred stock investment as well as a plan to reduce AIG's debt to the government, the source said. (Reporting by Paritosh Bansal, editing by Maureen Bavdek)
http://uk.reuters.com

Citigroup
WSJ
By DAVID ENRICH and DEBORAH SOLOMON
Citigroup Inc. and the federal government agreed to a third rescue that will give U.S. taxpayers as much as 36% of the bank but expose their ownership stake to greater risk from the recession and housing crisis.

Friday's agreement shows how hard the Obama administration is trying to stabilize the U.S. banking industry without a full-fledged nationalization that would wipe out investors and leave the government in charge. But the deal will punish existing shareholders of Citigroup, who will see their stake diluted by 74%, and likely do little to change the awkward relationship between federal officials and management of the New York company. ..........
The conversion leaves taxpayers exposed to the risk of greater losses. The government's preferred holdings had stood ahead of common stock in Citigroup's capital structure, meaning they were less likely to lose value if the company's woes continue to mount. In addition, by converting much of the U.S. stake to common shares, Citigroup won't have to pay the hefty dividend payouts that were attached to the preferred stock.
source: http://online.wsj.com/article/SB123573611480193881.html