Citigroup is in talks with U.S. officials about the federal government taking a larger stake in the troubled institution, according to people familiar with the situation. Colin Robertson
The aid would involve a new capital injection that would increase the government's stake in the troubled bank, but would not constitute nationalization, which has been a major concern for investors
In the movie, Wall Street, there is a great line in which Lou Mannheim tells Bud Fox that "you can't get a little pregnant." By this Mannheim means that you can't be a little corrupt or cut a few corners. Once someone goes over they are over. In much the same way, you can't get a little nationalized.
The Obama administration is playing an all too cute game and it won't work. The so called "street" was terrified that the Obama administration would nationalize all the banks. Calls were going out from such an eclectic group as Chris Dodd, Alan Greenspan and Lindsey Graham to do just that. Late last week, the Obama administration put out the word that they weren't planning to nationalize the banks. Instead, they have "merely" taken an increased stake in Citigroup.
Such a move is much the same as President Obama's plan for universal health care in which private companies will compete with government sponsored plans. Such schemes are nothing more than an illusion. Citigroup now has a built in advantage over any other bank. The Federal Government has an unlimited amount of money to work with. Citigroup is now assured viability no matter what. It will have unlimited resources available to it. As such, we have a banking system that is now rigged. Of course, it is only a matter of time before all banks want the same kind of advantage.
It would be no different in this sort of quasi government quasi public health care system. There's no way for the the private companies to compete with the government system. The government has access to unlimited amounts of money. So, soon, our banking system will just end the appearance of being private and be fully nationalized.
Of course, this government money won't come with no strings, especially with Obama at the helm. By taking government money, the banks have made deals with the devil. Banks will be run in the vision of the President and his team. Loans will be modified in order to save borrowers from foreclosure in a way that is determined by the President himself. Loans will be lent out in a way as the government dictates. The entire direction of the bank will now be determined by the Obama administration. Today it is Citigroup and tomorrow it will be the banking system at large.