U.S Government has bailout the country’s largest bank with the announcement of the deal that gives the federal government 36% control of Citigroup’s common stock.

The shares of Citigroup fell by 46 % in the premarket trading. The deal is to convert the company’s preferred shares to common shares. This move is to stabilize the crumbing banking business and increase the lending. This conversion also helps Citigroup as it increases the tangible equity of the bank and hopefully some change in the already poor balance sheets.

The U.S government has given Citigroup $ 45 billion for the return of preferred shares and warrants in the company. CEO Vikram Pandit insisted that the Citigroup management will still be in charge and all the decisions are being made to increase the long term profit and also maximize shareholder returns. Hence, the public need not worry about the nationalization of the bank and can put their concerns to rest. The deals cover the replacement of the majority of Citigroup’s independent directors. However, this does not apply to CEO Vikram Pandit and Chairman Richard Parsons and will continue to retain their posts in the company.

Via: CNN