I want some of that government math

In its desperate attempts to shore up Citigroup, Inc., the U.S. government has agreed to a third rescue attempt. The Treasury Department said it would convert $25 billion (with a "b") of preferred shares to common stock. The conversion would increase the U.S. interest in the company to 36 percent. [As the Federal Reserve Chairman Ben S. Bernanke avows that the U.S. will not nationalize the banking industry].

Now, this may seem like a reasonable position until you examine exactly what is happening with Citigroup. First of all, the U.S. government has already poured $45 billion into Citigroup. The company had a loss of $27.7 billion in 2008. To quote Bloomberg, "Assuming the maximum amount of preferred shares eligible for conversion, existing stockholders would be left with a 26 percent stake. The stock fell 96 cents to $1.50 in composite trading on the New York Stock Exchange at 4 p.m. as a record 2 billion shares changed hands. It plummeted 90 percent during the past 12 months and is down 78 percent so far this year."

What are the U.S. citizen's getting for their money? Under the terms of the deal, Citigroup will exchange common stock for as much as $27.5 billion of its preferred securities at a conversion price of $3.25 a share. However, Citigroup's stock has declined to around $1.50 a share, so there would be an immediate loss to the government equal to the difference between the conversion rate and the actual market value. Why can't I get a deal like this? I will certainly agree to sell my house, my cars or anything other dispensable item, to the government for over two times its current market value. I could then turn around and purchase a new house (or maybe even the same house) at its currently deflated value. What is Citigroup doing with all this free money, it is paying for a $20- million-a-year sponsorship of the New York Mets’ new baseball stadium in the New York City borough of Queens. Corporate- governance advocates also say the bank is paying for millions of dollars of perks, including offices, secretaries and cars and drivers, for retired executives.

Again to quote Bloomberg, "The bank said last week director Roberto Hernandez Ramirez will keep getting reimbursed for his use of private aircraft and other perks after he steps down from the board in April because of his continuing role as non-executive chairman of Banamex. The benefits, which also include an office, secretary and personal security, cost $2.61 million in 2007, according to a March regulatory filing"