Citigroup reaches aid deal with government - KWWL - Eastern Iowa Breaking News, Weather, Closings

Citigroup reaches aid deal with government

NEW YORK (AP) -- A deal has been made for a third rescue attempt in the past five months for struggling Citigroup.

The U.S. government will exchange up to $25 billion in emergency bailout money for as much as a 36 percent equity stake.

The deal is contingent on private investors also agreeing to a similar swap.

The conversion will help provide Citi the mix of capital needed to withstand further weakening in the economy. The stock-conversion option gives the government greater flexibility in dealing with ailing banks. It also gives the government voting shares, and therefore more say in a bank's operations.

Investors appeared disappointed in the deal and expected dilution of their stake, sending shares plummeting 94 cents to $1.56 in premarket trading.

Citi will also reshape its board of directors.

Online Producer: Mike Verlo

Powered by Frankly