For Immediate Release
Kucinich Requests Assurances Regarding Treasury’s Plan for Citigroup
WASHINGTON - Congressman Dennis Kucinich (D-OH) Friday sent a letter to Treasury Secretary, Timothy Geithner, asking questions regarding his plan to convert up to $25 billion of Treasury owned Citigroup preferred stock to common stock.
On Friday, February 27, Treasury announced the third major bailout for Citigroup in five months. The government will convert up to $25 billion in preferred shares, increasing the government's ownership stake in Citi from eight to thirty six percent.
The conversion, announced after the President unveiled a timeline for withdraw in Iraq, takes place as the government is preparing to put banks through a ‘stress test' to determine their stability.
The full text of the letter follows:
February 27, 2009
The Honorable Timothy Geithner
United States Department of the Treasury
1500 Pennsylvania Avenue, NW
Washington, D.C. 20220
Dear Secretary Geithner:
Earlier in the day you announced that the Department of the Treasury, at the request of Citigroup, will participate in a partial conversion of the government's preferred shares in the company to common equity. Although, according to the press release, this will not increase the federal government's investment in the bank, I have concerns that Treasury's action today could have serious consequences for the American taxpayer.
I request that you answer the following questions to provide some assurance that this conversion will not result in a substantial loss of taxpayer money.
1. Do you believe the conversion of preferred shares to common equity will dilute the price of current existing common equity?
2. What will happen to the federal government's common equity shares in the event that Citigroup files for bankruptcy?
3. To what extent is Treasury effecting this transaction in order to improve Citigroup's performance in the supervisory assessment process, or ‘stress test'?
Thank you for your prompt attention to this very serious matter.
Dennis J. Kucinich
Member of Congress