Tim Geithner is transforming into a weird reverse Robin Hood who takes money from regular people and shovels it into banks that vaporize it.
For example, today Tim agreed to take up to $25 billion of taxpayer preferred stock in Citigroup, which earns a nice fat dividend, and convert it into plain old Citigroup common stock at $3.25 a share. Citigroup common stock does not earn a dividend. It also is available in the public market for $1.60 a share.
So let’s say the government converts $25 billion of preferred at $3.25 a share. Taxpayers will own 7.7 billion shares.
And how much are those 7.7 billion shares actually worth?
So that’s a $13 billion gift Tim Geithner just gave Citi on your behalf this morning. How do you feel about that?
(And, before you answer, recall that Tim Geithner will almost certainly have to give Citi even more of your money next quarter. And the next quarter. And so on. And because, you know, the government REALLY doesn’t want to own banks, he’ll probably have to make the money even more of a gift each time.)
— Thanks to CNBC’s Steve Liesman, who did a similar calculation on the air a few minutes ago.