Citigroup Stock Swap

Bloomberg has the early news today. Essentially, Investor Uncle Sam is swapping Citgroup stocks.

This resembles turning the taxpayers' somewhat safer investment into a highly risky one, except that when they are both doomed to be worthless investments, Uncle Sam will still wind up with the bank.

Here's a summary:

• Our -- that is, the taxpayers' -- 8% stake of preferred shares in Citogroup will be exchanged for a 40% share in common stock. This really doesn't matter much (see above).
  
• The bank is suspending all dividends to both common and preferred shareholders. This doesn't matter much, either, since everyone knows Citigroup has no money left with which to pay dividends.
  
• The board will be reorganized just as soon as the drunken slumber of the old board can be interrupted.
  
• A "majority" of the new board members will be "independent."Independent of Wall Street thinking? We'll see, but don't count on it.
  
• And, "the U.S. doesn’t immediately intend to inject additional money after channeling $45 billion to the New York- based company last year."

Emphasis on the "immediately." Citigroup is a zombie bank. This latest is merely another half-step in Treasury Secretary Tim Geithner's piquaresque adventure of going through every capitalist contortion to prop up the insolvent mega-bank without nationalizing it. It won't work.

Heck, it hasn't worked. Use whatever word makes you comfortable -- stock swap, nationalization, receivership, insolvency, limbo, purgatory. The fact remains, the U.S. taxpayers now run, and effectively own, Citigroup.

Geithner just can't bring himself to tell the other 60% stockholders that their stock is worthless.