Nationalization Lite

Per the WSJ, Citigroup is in need of further capitalization assistance. Specifically, Citigroup wants the government to convert a substantial portion of the Treasury's $45B in preferred stock to common shares resulting in up to government 40% ownership. Currently, Citigroup has approximately 5.5B common shares outstanding, so it stands to reason that Citi wishes to dilute that to 9.2B by creating 3.7B of new common shares. As of 11AM today, C was trading at $2.14/share meaning that 3.7B new shares would equate to an increase in market capitalization of $7.92B. $7.92B only represents around 18% of the $45B that Citigroup received under TARP, which I wouldn't call a substantial portion. To convert all of the $45B in preferred stock to 3.7B in common shares, the common share price would have to be a bit north of $12/share. Considering that Citigroup is insolvent, $2.14/share is too much and paying anything higher borders on criminality.