There's an axiom that "you don't throw good money after bad". I get the feeling that is what the government is doing in the new Citi deal. And that's after, or if, Citi is able to convince additional private preferred holders to convert to common! I think it'll be interesting to see how many are willing to do so and on what terms. Moving down in the capital structure commands a premium - if I'm going to assume more risk I need to get paid for it.
I prefer this approach. There's been much discussion about "good bank/bad bank" strategies. Woodward & Hall's make sense, isn't complicated, and free's up lendable capital.
