:: Citigroup agreed to exchange up to $25 billion in emergency bailout money that the government provided Citigroup Inc. for as much as a 36 percent equity stake in the bank. The reasoning behing it:
The administration decided to restructure the bailout package for Citigroup again in the hopes that converting $25 billion of preferred shares into common stock would give investors more confidence the bank has sufficient capital reserves to withstand mounting losses on its holdings of mortgages and other loans. While the conversion to common stock will dilute current shareholders' investments, a wider equity base could calm investors since there would be more reserves in place to guard against further losses as the economy sours.
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