Shares of Citigroup plunged on Friday after the U.S. government announced plans to take a large stake in common shares of the embattled bank. The development fanned nervous whispers that other banks could go the same way.
Although the U.S. Treasury is not infusing Citigroup with any new capital, it will convert up to $25 billion in preferred shares to common stock in its third attempt to prop up the bank in the past five months.
Is Citigroup alone in its misery?
Most investors say probably not. Sean Egan, president of Egan-Jones Ratings Company tells our producers that Bank of America could be in the same boat partly becuase its still not well after swallowing Merrill. "Bank Of America probably needs $100 billion in equity in the next 100 days," he says.
And there could be big changes in store. “Ken Lewis is likely to be replaced over the next 6 to 12 months,” he says. They’ll get someone in there who can do a better job.”
It’s worth noting the Citigroup transaction requires no new federal funds nor taxpayer investments.