The Nationalization of the Banking System Is Underway

The big news this morning is that Citigroup (C) and the Feds are currently discussing whether the government should increase its ownership stake to as much as 40%.

Citigroup’s stock has been hammered relentlessly. At one point on Friday, the shares got down to $1.61. That’s down from $55 two years ago.

The government already owns a large block of preferred stock. The plan that’s being discussed would involve converting those shares to common stock. If that were to happen, then Citi’s current shareholders would be diluted.

I’m still urging investors to steer clear of financial stocks, although I’ve recently raised Citigroup to a hold in Portfolio Grader.

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