You have to wonder....

Feb. 23 (Bloomberg) -- Citigroup Inc., the recipient of $45 billion in U.S. government aid, is in talks with federal officials that may increase state ownership of the bank, the Wall Street Journal said.

The government may end up holding as much as 40 percent of Citigroup’s common stock, the newspaper said, citing people familiar with the situation it didn’t identify.

.... what is going through Geithner's mind - and Pandit's.

I wonder if there's a vacuum in there.  It sure looks like it.

I have a really radical proposal!  Let's force these "captains of industry" to disclose what they're holding, both on balance sheet and off, along with the 'models' they claim are giving them valuation information.  Break it down to the CUSIP level (or equivalent if there isn't one) and let's look under the kimono!

All this nonsense about "TCE", or equity valuation as a percentage of assets, is just that - nonsense.  Focusing there focuses attention on what amount to bear raids fomented by people playing in the CDS market and we must stop that crap for enterprises that are being guaranteed by the United States Government.

This sort of speculative line of attack is literally an attempt to force the government to abandon the company after pouring (in Citibank's case) over $300 billion in asset guarantees into it!  This is outrageous on so many levels its not funny - first, that we'd stick that level of guarantee in there in the first place, then that we would allow speculative attack on it.

Bluntly put, Geithner and the SEC need to get off the dime right now and declare their intentions.  The CDS market must be closed for speculative positions against these institutions, and I would argue that absent exchange-traded (and fully-collateralized and margined) positions this part of the casino should be closed and locked permanently for all firms.

But heh, this feeds right into the idea that the government should tamper in the equity markets with rumor and innuendo.  After all, if the conversion price of that preferred ends up tied to the common's price, I can easily see where Geithner could simply utter the word "nationalization" on national TV, crash the equity price, then force conversion and wind up owning the whole bank.

The government would never do something that unethical (or worse), would it?  Naw, there's no history of government doing things like announcing discount rate cuts 30 minutes before the market opens on Options Expiration (August 2007) or not disclosing to a company that the discount window will be opened to firms like itself six hours after it agrees to a $2 take-under, right?

The manipulation, game-playing and outrageous activity bordering on an a flat-out scam perpetrated by our government continues.  This one seems to have popped the futures overnight, presumably due to market participants coming to believe that they won't be totally wiped out (as was assumed up until late Friday) - we'll see what the adults think of it in the morning.