Citigroup and the federal government have reached a deal to boost the US stake in the bank to up to 40%, the parties announced this morning. The deal gives shareholders more protection, but in return, agrees to a Treasury Department demand for an overhaul of the embattled bank's board of directors. The new board will include a majority of independent directors; CEO Vikram Pandit is expected to keep his job, the Wall Street Journal reports.
Treasury officials have agreed to convert some of the government holdings of the bank's preferred shares into riskier common stock, but only to the extent that Citigroup can persuade private investors to do the same. Treasury will match private investors' conversions up to $25 billion. Despite the deal, Citi will still have to undergo the same government-established "stress tests" as other major banks to help judge its continued viability.
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