Agreement on 40% stake achieved between Citi and the government

According to the Wall Street Journal report, Citigroup and the U.S. government have signed an agreement, including government’s stake in the bank increase and bank’s getting a boardroom shakeup in return.

The size of the government's new stake will depend on the amount of preferred stocks that private investors intend to convert into common stock. Treasury's stake in the bank is anticipated to increase to about 30% or 40% of Citigroup's shares. As the Journal said, the Treasury Dept. has agreed to turn some of the government's current holdings of preferred Citigroup stocks into common stocks but only in an amount that equals to that the Citigroup can persuade private investors to do the same. The Treasury supposed to match private investors' conversions dollar-for-dollar, up to $25 billion. The government demands the bank's board of directors to have a majority of independent directors as a condition of the agreement. Chief Executive Vikram Pandit is expected to keep his job.

However some core details of the agreement, including the price at which the government will turn the preferred stocks into common stocks, stay indistinct. According to the report, Citigroup was asking regulators to convert at a price of as much as $5 per share, that’s twice the bank's closing stock price on Thursday.