US could take 25-40 percent stake in Citi Group

The US government is in talks that could lead to it taking take a 25-40 percent stake in Citigroup, The Wall Street Journal reported Sunday.

"While the discussions could fall apart, the government could wind up holding as much as 40 percent of Citigroup's common stock. Bank executives hope the stake will be closer to 25 percent," the paper reported citing unnamed people familiar with the situation.

"The proposal was made by Citigroup to its regulators. The (Barack) Obama administration hasn't indicated if it supports the plan," the report said citing people with knowledge of the talks.

Continuous disaster for Citigroup

The Citi never sleeps. Well the stock is certainly keeping investors up nights!

Citigroup lost more than one-quarter of its market value as new support from its largest individual investor failed to ease worries over whether it will have enough capital to withstand billions of dollars of potential losses.

Saudi Prince Alwaleed bin Talal said he plans to increase his stake in Citigroup, the No. 2 U.S. bank by assets, to 5 percent from less than 4 percent, calling its shares "dramatically undervalued."

Investors, however, were unimpressed, driving shares down below $5 on Thursday , a level not seen since 1994. Some investors and analysts questioned whether Citigroup would be able to handle billions of dollars in potential credit losses and write-downs in 2009 as the world economy sinks into recession.

The bank could face losses of $20 billion or more next year on loans in commercial real estate, emerging markets and credit cards