Talk Back

In the  Dow Jones Newswire article “In Latest Citi Rescue, Government Spooks Investors With New Shift” by Joe Bel Bruno, Marshall Eckblad
and Jessica Papini, the writers say government’s new blueprint for bailing out crippled banks has investors thinking twice about sinking money into a sector once known for its steady returns and value.

In part:

   NEW YORK — The government’s new blueprint for bailing out crippled banks has investors thinking twice about sinking money into a sector once known for its steady returns and value.

  For weeks, investors expected the government to simply take a larger stake in Citigroup Inc. (C) and dilute common shareholders. But, the decision to stop paying dividends on most of the bank’s preferred shares caught many by surprise. Suddenly, bank preferred shares have lost their aura of safety.

  Investors complain that the latest rescue of Citigroup represents yet another shift in the government’s strategy.

Struggling banking giant Citigroup Inc. (C), moving aggressively to shore up its equity base, announced a stock swap Friday that if successful will leave  the government owning more than a third of the company and wipe out nearly three-quarters of existing shareholders’ stake. Will the latest rescue plan be enough to save Citi?

Should the U.S. government temporarily nationalize some banks in order to facilitate an orderly restructuring and act as an implied guarantee to soothe customer concerns?