Umbrellas

Citigroup Inc. is in talks with federal officials that could result in the U.S. government substantially expanding its ownership of the struggling bank, according to people familiar with the situation.

While the discussions could fall apart, the government could wind up holding as much as 40% of Citigroup's common stock. Bank executives hope the stake will be closer to 25%, these people said.

Any such move would give federal officials far greater influence over one of the world's largest financial institutions. Citigroup has proposed the plan to its regulators. The Obama administration hasn't indicated if it supports the plan, according to people with knowledge of the talks.

When federal officials began pumping capital into U.S. banks last October, few experts would have predicted that the government would soon be wrestling with the possibility of taking voting control of large financial institutions. The potential move at Citigroup would give the government its biggest ownership of a financial-services company since the September bailout of insurer American International Group Inc., which left taxpayers with an 80% stake.

The talks reflect a growing fear that Citigroup and other big U.S. banks could be overwhelmed by losses amid the recession and housing crisis. Last week, Citigroup's share price fell below $2 to an 18-year low. Bank executives increasingly believe that the government needs to take a larger ownership stake in the institution to stop the slide.

----------What does it all really mean? Bailing out who exactly?

Well, obviously the major shareholders of Citigroup. And who would that be?

MAJOR DIRECT HOLDERS
Holder ----------------Shares Reported
MAHERAS THOS ........ 2,440,092
FORESE JAMES ..........1,809,500
PANDIT VIKRAM ...........1,707,503
PRINCE CHARLES .......1,612,732
MILLS WILLIAM .............1,373,229

TOP INSTITUTIONAL HOLDERS (in Citigroup)
Capital World Investors
Barclays Global Investors UK Holdings Ltd
STATE STREET CORPORATION
VANGUARD GROUP, INC. (THE)
Capital Research Global Investors
AXA
DODGE & COX INC
Bank of New York Mellon Corporation
MORGAN STANLEY
UBS GLOBAL ASSET MANAGEMENT (AMERICAS) INC

TOP MUTUAL FUND HOLDERS (in Citigroup)
GROWTH FUND OF AMERICA INC
INVESTMENT COMPANY OF AMERICA
WASHINGTON MUTUAL INVESTORS FUND
VANGUARD 500 INDEX FUND
DODGE & COX STOCK FUND
SPDR TRUST SERIES 1
INCOME FUND OF AMERICA INC
VANGUARD TOTAL STOCK MARKET INDEX FUND
SELECT SECTOR SPDR FUND-FINANCIAL
VANGUARD/WINDSOR II

Own any stock, or maybe your employee pension invested in such companies? Has your retirement plan been giving merit pay to talented investment managers who invested in companies that need bailout? Hmmm. Let's look at one - take Vanguard Windsor II.

Vanguard month-end ten largest holdings as of 01/31/2009
Rank Holdings
1 Occidental Petroleum Corp.
2 Wyeth
3 Bristol-Myers Squibb Co.
4 International Business Machines Corp.
5 Verizon Communications Inc.
6 Imperial Tobacco Group ADR
7 AT&T Inc.
8 ConocoPhillips Co.
9 JPMorgan Chase & Co.
10 Philip Morris International Inc.
Ten largest holdings = 28.9% of total net assets.

Tobacco, pharma, oil, big business ....

Seems like only yesterday Prince Walid bin Talal of Saudi Arabia was the biggest shareholder in Citigroup - oh wait, it was 1991 when the prince first invested in the financially reeling Citicorp. My my, 18 years ago Citigroup's predecessor, Citicorp, was reeling from loan losses in Latin America and real estate.

Travelers Group and banking giant Citicorp wowed the business community with the announcement in April 1998 of plans for the largest merger ever to hit Wall Street. The merger was finalized in October and a new financial powerhouse – Citigroup – was born.

Citi"group", now barely 10 years old - not even out of puberty, and reeling again.

But! Long before Citi, group or corp (aka Citibank), the company operated under the name of National City Bank.

And what/who is National City Bank?

Recap:
On June 16, 1812, with $2 million of capital, City Bank of New York (now Citibank) opened for business in New York City. In 1968, First National City Corporation (later renamed Citicorp), a bank holding company, became the parent of Citibank. After the 1929 market crash the federal government rescued NCB with multimillions. In fact, DC lawmakers blamed National City for the bubble/crash of 1929 and passed the Congress passed the Glass-Steagall Act, which Bill Clinton and congress would eventually do away with.

In the 1980s, Citi ran into trouble over loans made to in Latin America. Citi faced billions of dollars in potential losses when Mexico became insolvent in 1982. The federal government came to the rescue with the Brady Plan to help sell Latin American debt and have the banks write off some of it.

Citi needed help again during the recession of the early 1990s. Holding $10 billion in bad loans, related to leveraged buyouts or commercial real estate, their stock price fell and rumors of bankruptcy began to circulate. Again, the Federal Reserve came to the rescue with several interest rate cuts.

In 1998, all Citicorp divisions merged with all divisions of Travelers Group to form Citigroup Inc. Citibank continues under the Citigroup umbrella.

Get ready folks, you have a lot of large, reeling umbrellas to hold.