The US government and Citigroup Inc have cut a deal on the government substantially increasing its stake in the ailing bank, dpa quoted the Treasury as announcing today. Under the agreement, the government will own as much as 36 per cent of the bank's shares in exchange for better access to Treasury funds, which could help Citigroup avoid bankruptcy. The part-nationalization of what was once the world's largest bank has fuelled speculation that more financial institutions could face a similar government takeover. The Treasury will convert up to 25 billion dollars of already- owned preferred stock into common shares in order to effect the move, on the condition that private investors match the Treasury's commitment. The government currently holds an 8-per-cent stake in the company. The new move involves only a conversion of shares, not an increase in the Treasury's existing 45-billion-dollar investment in the company.
