The government isn’t done with CITI yet….our previous posts on Geithner and the troubled CITI bailout he put together last Fall here and here and here and here and even here ….

CNBC: Citigroup is in talks with U.S. officials about the federal government taking a larger stake in the troubled institution, according to people familiar with the situation.

The aid would involve a new capital injection that would increase the government’s stake in the troubled bank, but would not constitute nationalization, which has been a major concern for investors.

-snip-

Sources say bank executives are hoping the govenment stake will top out at about 25 percent, athough it is possible it could be as high as 40 percent. In either case, if the govenment converts its current preferred-stock status to common shares, Citi shareholders would see their stakes diluted and the government would potentially have a much larger influence over Citi.

And yes it would be nationalization, despite the semantics of Team Obama, you just cannot be slightly pregnant:

Any additional money that Citi receives from the government automatically means a further stock dilution. While Obama Administration officials say this isn’t nationalization, markets may interpret the situation differently and see it as de facto nationalization.

The move likely would make the U.S. government the biggest shareholder of Citigroup, owning a majority of its stock. This is de facto government ownership, or nationalization. What this ownership means at this point, nobody knows

What can CITI do? Nothing they are frakked, with the governments giant feet coming down everyplace NO ONE wants to get in front of them, and no private equity will come in as a result….

Citi could also try to raise fresh equity with a public share offering, the Financial Times reported. The aim would be to keep the government stake to no more than 40 percent or at least below 50 percent, it said, citing people familiar with the plan.

Message to Pandit, you don’t sit down to dinner with the Devil and leave the table unscathed my friend…..