So Citigroup (C) has proposed that the US taxpayer and other preferred shareholders convert up to $75 billion of preferred stock into common stock, thus bolstering the company's tangible equity and putting it in less desperate need of a complete takeover.

And what will the US taxpayer get for this preferred stock conversion? 40% of the company for some of its $45 billion of preferred, say reports. The reports add that Citigroup's goal here is to keep the US's ownership under 50%, so this won't be a de facto nationalization.

Well, that's nice for Citigroup...and another ream-job for taxpayers.

Citigroup's common equity is currently worth $10 billion. If the US were to convert all $45 billion of its preferred at the current stock price, it should end up with 80% of the company, not 40%. If another $30 billion of preferreds converted, the US should end up with just over 50%.

For the US to convert $45 billion of preferred to common and only get 40% of the company, Citigroup's existing common equity would have to be valued at $65 billion, not $10 billion, and the conversion price would have to be about $10 a share. Or the US would only be able to convert $4 billion of its $45 billion, which wouldn't help Citigroup's tangible equity ratio much.

So is that what Citigroup is trying to do here? Persuade the US goverment to convert to common stock at a price miles above the current trading price, screwing the US taxpayer yet again?

Or does Citigroup have some other secret plan up its sleeve?