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US Government Boosts Stake in Ailing Banking Giant


U.S. government officials and Citigroup have agreed on a deal to rescue the troubled banking giant for a third time.

Citigroup says the deal will boost the government's stake in the ailing financial institution to as much as 36 percent. The bank also agreed to make changes to its board of directors.

Citigroup has been hit especially hard by the financial crisis, getting $45 billion from the government since late last year, when the company's stocks lost as much as 60 percent of their value.

Shares in the bank fell again in trading Friday. Some investors worried that while the deal may help the bank survive, they will still lose a considerable amount of money.

Also Friday, Citigroup announced it had underestimated its losses for the last three months of 2008 by about $10 billion.

The deal to save Citigroup converts the type of stock the government holds in the bank from "preferred" to "common." The move is intended to improve the bank's financial strength.

Citigroup says investors from around the world, including Saudi Arabia and Singapore, also are converting their stock to help the bank.

Some investors and analysts also worry the government's deal with Citigroup means the government will start to take over, or nationalize banks, something the White House and other government officials have repeatedly denied.

On Thursday, U.S. President Barack Obama unveiled his 2010 budget and called for another $250 billion to bail out troubled banks.

Administration officials say the money could be leveraged to buy about $750 billion of troubled assets from struggling institutions. That amount is $50 billion more than the U.S. set aside when it first created a program to rescue the banking industry last year.

Some information for this report was provided by AP and Bloomberg.

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