Not a Run on the Banks – More of a Mellow Jog

Citibank stock traded under $2 on Friday.

A senior Obama administration official, reports The Atlantic, said, “We are not rushing towards nationalization at all,” the official said.  “But capital flight requires capital infusion.”  

 Capital infusion means government buying stocks. Right now, the government owns about 25% of the bank’s overall equity. 

 Uncle Sam’s solution? Turn stock into common equity. The problem? If the government starts owning more than 40% stock, then the bank is effectively nationalized. And also – the government must talk up the stock price of Citi, so therefore how can any reassurances be taken seriously?

Which means the government is manipulating the bank, its perception, and shareholders.

 Which all goes to say: isn’t it interesting to witness how radical change, in many cases, seems almost subtle, gentle, soft.

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