Rumors: U.S. to Nationalize Citigroup Inc. and Bank of America Corp

Bank of America (NYSE:BAC) shares fell 13% and Citigroup Inc. (NYSE:C) down 8% finishing the day at just $3.50. The hottest rumor on Wall Street today was that the government was planning to effectively nationalize Citigroup Inc. and Bank of America Corp., perhaps as early as this weekend.  Rumors are killing stocks these days.

Fellow Masters, stay clear of Citi and BofA until the dust settles. In the past 52 weeks Citigroup shares have lost 86% and Bank of America down 81%, its beyond bad.

From the LA Times:

That talk has devastated many financial stocks, and hammered the broader market for a second straight session -- although buyers have been returning in the last half-hour.

The nationalization rumors were put to Federal Deposit Insurance Corp. Chairwoman Sheila Bair at an appearance in New York today, and her non-denial answer wasn’t likely to make investors feel better.

"I’d be very surprised if that happened," she said, according to Bloomberg News.

Some investors weren't sticking around to find out if the rumor was true: Citigroup fell as low as $3.36 early in the session and about 11 a.m. PST was off 43 cents to $4.10.

Bank of America fell as low as $7.35 and was off $1.56 to $8.64 about 11 a.m PST.

The Dow Jones industrial average was off as much as 205 points but has pared that to a loss of 43 points at 8,156.

The Dow’s closing low in the fall market collapse was 7,552, reached on Nov. 20.

The latest dive in the financials began early this week on fears that some of the biggest players have become bottomless pits for government capital, as bad loans continue to mount.

Those fears soared late Wednesday on news reports that Bank of America, which got $25 billion under the financial-system bailout Congress approved in October, was negotiating another capital infusion from the Treasury.

Here's some chart fun for you, BofA and Citi vs. the Dow Jones and S&P, awesome.

Enjoy the weekend. 

SOURCE: http://latimesblogs.latimes.com/money_co/2009/01/nationalize-b-1.html