For those who argue that the rate of growth of economic activity is turning positive--that economies are contracting but at a slower rate than in the fourth quarter of 2008--the latest data don't confirm this relative optimism. In 2008's fourth quarter, gross domestic product fell by about 6% in the U.S., 6% in the euro zone, 8% in Germany, 12% in Japan, 16% in Singapore and 20% in South Korea. So things are even more awful in Europe and Asia than in the U.S.

There is, in fact, a rising risk of a global L-shaped depression that would be even worse than the current, painful U-shaped global recession. Here's why:

First, note that most indicators suggest that the second derivative of economic activity is still sharply negative in Europe and Japan and close to negative in the U.S. and China. Some signals that the second derivative was turning positive for the U.S. and China turned out to be fake starts. For the U.S., the Empire State and Philly Fed indexes of manufacturing are still in free fall; initial claims for unemployment benefits are up to scary levels, suggesting accelerating job losses; and January's sales increase is a fluke--more of a rebound from a very depressed December, after aggressive post-holiday sales, than a sustainable recovery.

For China, the growth of credit is only driven by firms borrowing cheap to invest in higher-returning deposits, not to invest, and steel prices in China have resumed their sharp fall. The more scary data are those for trade flows in Asia, with exports falling by about 40% to 50% in Japan, Taiwan and Korea.

Even correcting for the effect of the Chinese New Year, exports and imports are sharply down in China, with imports falling (-40%) more than exports. This is a scary signal, as Chinese imports are mostly raw materials and intermediate inputs. So while Chinese exports have fallen so far less than in the rest of Asia, they may fall much more sharply in the months ahead, as signaled by the free fall in imports.

With economic activity contracting in 2009's first quarter at the same rate as in 2008's fourth quarter, a nasty U-shaped recession could turn into a more severe L-shaped near-depression (or stag-deflation). The scale and speed of synchronized global economic contraction is really unprecedented (at least since the Great Depression), with a free fall of GDP, income, consumption, industrial production, employment, exports, imports, residential investment and, more ominously, capital expenditures around the world. And now many emerging-market economies are on the verge of a fully fledged financial crisis, starting with emerging Europe.

Fiscal and monetary stimulus is becoming more aggressive in the U.S. and China, and less so in the euro zone and Japan, where policymakers are frozen and behind the curve. But such stimulus is unlikely to lead to a sustained economic recovery. Monetary easing--even unorthodox--is like pushing on a string when (1) the problems of the economy are of insolvency/credit rather than just illiquidity; (2) there is a global glut of capacity (housing, autos and consumer durables and massive excess capacity, because of years of overinvestment by China, Asia and other emerging markets), while strapped firms and households don't react to lower interest rates, as it takes years to work out this glut; (3) deflation keeps real policy rates high and rising while nominal policy rates are close to zero; and (4) high yield spreads are still 2,000 basis points relative to safe Treasuries in spite of zero policy rates.

Fiscal policy in the U.S. and China also has its limits. Of the $800 billion of the U.S. fiscal stimulus, only $200 billion will be spent in 2009, with most of it being backloaded to 2010 and later. And of this $200 billion, half is tax cuts that will be mostly saved rather than spent, as households are worried about jobs and paying their credit card and mortgage bills. (Of last year's $100 billion tax cut, only 30% was spent and the rest saved.)

Thus, given the collapse of five out of six components of aggregate demand (consumption, residential investment, capital expenditure in the corporate sector, business inventories and exports), the stimulus from government spending will be puny this year.

Chinese fiscal stimulus will also provide much less bang for the headline buck ($480 billion). For one thing, you have an economy radically dependent on trade: a trade surplus of 12% of GDP, exports above 40% of GDP, and most investment (that is almost 50% of GDP) going to the production of more capacity/machinery to produce more exportable goods. The rest of investment is in residential construction (now falling sharply following the bursting of the Chinese housing bubble) and infrastructure investment (the only component of investment that is rising).

With massive excess capacity in the industrial/manufacturing sector and thousands of firms shutting down, why would private and state-owned firms invest more, even if interest rates are lower and credit is cheaper? Forcing state-owned banks and firms to, respectively, lend and spend/invest more will only increase the size of nonperforming loans and the amount of excess capacity. And with most economic activity and fiscal stimulus being capital- rather than labor-intensive, the drag on job creation will continue.

So without a recovery in the U.S. and global economy, there cannot be a sustainable recovery of Chinese growth. And with the U.S, recovery requiring lower consumption, higher private savings and lower trade deficits, a U.S. recovery requires China's and other surplus countries' (Japan, Germany, etc.) growth to depend more on domestic demand and less on net exports. But domestic-demand growth is anemic in surplus countries for cyclical and structural reasons. So a recovery of the global economy cannot occur without a rapid and orderly adjustment of global current account imbalances.

Meanwhile, the adjustment of U.S. consumption and savings is continuing. The January personal spending numbers were up for one month (a temporary fluke driven by transient factors), and personal savings were up to 5%. But that increase in savings is only illusory. There is a difference between the national income account (NIA) definition of household savings (disposable income minus consumption spending) and the economic definitions of savings as the change in wealth/net worth: savings as the change in wealth is equal to the NIA definition of savings plus capital gains/losses on the value of existing wealth (financial assets and real assets such as housing wealth).

In the years when stock markets and home values were going up, the apologists for the sharp rise in consumption and measured fall in savings were arguing that the measured savings were distorted downward by failing to account for the change in net worth due to the rise in home prices and the stock markets.

But now with stock prices down over 50% from peak and home prices down 25% from peak (and still to fall another 20%), the destruction of household net worth has become dramatic. Thus, correcting for the fall in net worth, personal savings is not 5%, as the official NIA definition suggests, but rather sharply negative.

In other terms, given the massive destruction of household wealth/net worth since 2006-07, the NIA measure of savings will have to increase much more sharply than has currently occurred to restore households' severely damaged balance sheets. Thus, the contraction of real consumption will have to continue for years to come before the adjustment is completed.

In the meanwhile the Dow Jones industrial average is down today below 7,000, and U.S. equity indexes are 20% down from the beginning of the year. I argued in early January that the 25% stock market rally from late November to the year's end was another bear market suckers' rally that would fizzle out completely once an onslaught of worse than expected macro and earnings news, and worse than expected financial shocks, occurs. And the same factors will put further downward pressures on U.S. and global equities for the rest of the year, as the recession will continue into 2010, if not longer (a rising risk of an L-shaped near-depression).

Of course, you cannot rule out another bear market suckers' rally in 2009, most likely in the second or third quarters. The drivers of this rally will be the improvement in second derivatives of economic growth and activity in the U.S. and China that the policy stimulus will provide on a temporary basis. But after the effects of a tax cut fizzle out in late summer, and after the shovel-ready infrastructure projects are done, the policy stimulus will slacken by the fourth quarter, as most infrastructure projects take years to be started, let alone finished.

Similarly in China, the fiscal stimulus will provide a fake boost to non-tradable productive activities while the traded sector and manufacturing continue to contract. But given the severity of macro, household, financial-firm and corporate imbalances in the U.S. and around the world, this second- or third-quarter suckers' market rally will fizzle out later in the year, like the previous five ones in the last 12 months.

In the meantime, the massacre in financial markets and among financial firms is continuing. The debate on "bank nationalization" is borderline surreal, with the U.S. government having already committed--between guarantees, investment, recapitalization and liquidity provision--about $9 trillion of government financial resources to the financial system (and having already spent $2 trillion of this staggering $9 trillion figure).

Thus, the U.S. financial system is de facto nationalized, as the Federal Reserve has become the lender of first and only resort rather than the lender of last resort, and the U.S. Treasury is the spender and guarantor of first and only resort. The only issue is whether banks and financial institutions should also be nationalized de jure.

But even in this case, the distinction is only between partial nationalization and full nationalization: With 36% (and soon to be larger) ownership of Citi (nyse: C - news - people ), the U.S. government is already the largest shareholder there. So what is the non-sense about not nationalizing banks? Citi is already effectively partially nationalized; the only issue is whether it should be fully nationalized.

Ditto for AIG (nyse: AIG - news - people ), which lost $62 billion in the fourth quarter and $99 billion in all of 2008 and is already 80% government-owned. With such staggering losses, it should be formally 100% government-owned. And now the Fed and Treasury commitments of public resources to the bailout of the shareholders and creditors of AIG have gone from $80 billion to $162 billion.

Given that common shareholders of AIG are already effectively wiped out (the stock has become a penny stock), the bailout of AIG is a bailout of the creditors of AIG that would now be insolvent without such a bailout. AIG sold over $500 billion of toxic credit default swap protection, and the counter-parties of this toxic insurance are major U.S. broker-dealers and banks.

News and banks analysts' reports suggested that Goldman Sachs (nyse: GS - news - people ) got about $25 billion of the government bailout of AIG and that Merrill Lynch was the second largest benefactor of the government largesse. These are educated guesses, as the government is hiding the counter-party benefactors of the AIG bailout. (Maybe Bloomberg should sue the Fed and Treasury again to have them disclose this information.)

But some things are known: Goldman's Lloyd Blankfein was the only CEO of a Wall Street firm who was present at the New York Fed meeting when the AIG bailout was discussed. So let us not kid each other: The $162 billion bailout of AIG is a nontransparent, opaque and shady bailout of the AIG counter-parties: Goldman Sachs, Merrill Lynch and other domestic and foreign financial institutions.

So for the Treasury to hide behind the "systemic risk" excuse to fork out another $30 billion to AIG is a polite way to say that without such a bailout (and another half-dozen government bailout programs such as TAF, TSLF, PDCF, TARP, TALF and a program that allowed $170 billion of additional debt borrowing by banks and other broker-dealers, with a full government guarantee), Goldman Sachs and every other broker-dealer and major U.S. bank would already be fully insolvent today.

And even with the $2 trillion of government support, most of these financial institutions are insolvent, as delinquency and charge-off rates are now rising at a rate--given the macro outlook--that means expected credit losses for U.S. financial firms will peak at $3.6 trillion. So, in simple words, the U.S. financial system is effectively insolvent.

Nouriel Roubini, a professor at the Stern Business School at New York University and chairman of Roubini Global Economics, is a weekly columnist for Forbes.com.

Amazon.com Inc. has received a lot of attention and respectable sales for its Kindle e-book reader, but it's hardly made a dent in the hardcover armor of the old-fashioned paper book.

On Wednesday, the Internet company revealed another prong of its strategy in making its gigantic e-book library available on a device already in millions of hands: the iPhone.

This is a big step for e-books, which have lingered outside the mainstream for nearly two decades even as digital media have conquered music and film distribution. Amazon's move combines a readily available device that's suitable for reading with a good distribution system and reasonably priced books.

That said, the first version of the iPhone application is crude, and Amazon would do well to release a software update soon to demonstrate its commitment to the iPhone.

But before we get into that, let's take a look at how the Kindle app works. It's free, available in Apple Inc. (nasdaq: AAPL - news - people )'s App Store for U.S. residents. Amazon says it's working on taking it international, though I wouldn't hold my breath because that would involve securing international publishing rights. Apart from the iPhone, it will also work on the iPod Touch.

Once you've loaded the app, you can buy books on Amazon's Web store. You'll have to use either a computer or the iPhone's browser. Unlike some other e-book readers, including the Kindle, the app doesn't have a built-in store. Considering that most people are familiar with the Web site, this isn't a major shortcoming.

New books cost a few dollars less than the print versions, and some public-domain books are available for 99 cents.

Tap one, and its text fills the screen. Turn the page by swiping over it with your finger. If you do something else with your phone, then return to the reader app, it will show you the last page you were reading, so there's no need to fiddle with bookmarks or bend page corners.

That's great for reading short snatches here and there. Whip your iPhone out in the elevator, and your co-travellers won't know that you're ignoring them in the best way by catching up on Danielle Steel. You won't look like a snob in the supermarket checkout line, even if you're reading Stendhal's "The Charterhouse of Parma."

Since the screen is backlit, you don't need a light source.

If you've already bought a book for the Kindle device, it will load on your iPhone for free, and vice versa. If you're reading a book both on the Kindle and the iPhone, the two devices will communicate to keep track of how far you've read.

This sounds elegant, but the app has a mildly annoying habit of freezing when it's trying to communicate with Amazon when your wireless connection is weak.

Most of the other shortcomings have to do with reading comfort.

E-book readers haven't taken off in part because people don't like reading on a computer screen. The Kindle reading device, which costs $359, tackles that by using a novel screen technology known as electronic ink. It's not backlit, so it looks a lot more like paper, but it has numerous drawbacks, most notably that it can't show a bright white or a really dark black. Since it doesn't show any colors either, it looks like gray, unbleached paper printed with weak ink.

The iPhone and iPod Touch screens are nothing like that, of course. They have great contrast and color. But the Kindle app will show all books on a white background that many will find too bright, making it uncomfortable to read. You can turn down the screen brightness, but that will leave it too dark for other applications.

Other e-book readers available on the iPhone, like eReader and Stanza, let you pick a background and text color that won't hurt your eyes. These other reading applications also let you pick the font and set the margins on the screen. The only adjustment the Amazon app offers is the font size.

I also noticed that the app cut off the ends of some indented paragraphs in Max Brooks' "The Zombie Survival Guide," making them impossible to read. The Kindle 2, which went on sale last week, doesn't do this. Hopefully Amazon will fix the app before there's a major zombie uprising.

But the Kindle on the iPhone is still the best e-book reader I've seen so far.

Other applications are hampered by a weak selection of books and inelegant ordering systems. You can probably find something you won't mind reading on the eReader and Stanza, but if you have a particular book in mind from the outset, you're likely to be disappointed. Stanza has the bad habit of freezing for nearly a minute when launched.

A third, relatively new application called Shortcovers gave me frequent connection problems, and perplexingly it seems to emphasize providing samples rather than full books, even when the books are in the public domain.

The eReader does have the virtue of being available for other cell phones, so you're not completely left out if you don't have an iPhone. Another alternative, Mobipocket, is available for practically every "smart" phone except the iPhone. But there are few phones out there with screens large and sharp enough to make reading pleasurable.

The Kindle 2 is four times the size of the iPhone. You might prefer Kindle's screen, but I think most people will be fine with the phone once they get used to it. The dedicated reader has much longer battery life, but the iPhone will last for a domestic flight, and you need a charge the phone every other day or so anyway.

Perhaps the biggest advantage of the Kindle 2 is that it can subscribe to newspapers, which load wirelessly every day. The iPhone makes up for this to some extent through free news applications.

The iPhone costs less to buy than the Kindle, but the monthly wireless service fees quickly make up the difference, so don't get an iPhone just as an e-book reader. For that, get an iPod Touch for $229. It doesn't have any monthly fees.

Try the app. With an engrossing book and the brightness turned down, you'll forget after a little while that you're not reading on paper, and your surroundings will fade as your mind is sucked into that little screen.

Copyright 2008 Associated Press. All rights reserved. This material may not be published broadcast, rewritten, or redistributed

Roman Catholic bishops in Italy are urging the faithful to go on a high-tech fast for Lent, switching off modern appliances from cars to MP3 players and abstaining from surfing the Web or text messaging until Easter.

The suggestion gives a modern twist to traditional forms of abstinence in the period Christians set aside for fasting and prayer ahead of Easter. And it shows the Church's increasing focus on the use of technology as well as its perceived abuses.

Dioceses and Catholic groups in Modena, southern Bari and other cities have called for a ban on text messaging every Friday in Lent, which began last week with Ash Wednesday.

"It's a small way to remember the importance of concrete and not virtual relationships," the Modena diocese said in a statement. "It's an instrument to remind us that our actions and lifestyles have consequences in distant countries."

The diocese said the "no SMS day" seeks to draw attention especially to years of conflict in Congo fueled in part by the struggle for control of coltan mines. The mineral is an essential material in cell phones.

Dioceses and Catholic groups in Modena, southern Bari and other cities have called for a ban on text messaging every Friday in Lent, which began last week with Ash Wednesday.

"It's a small way to remember the importance of concrete and not virtual relationships," the Modena diocese said in a statement. "It's an instrument to remind us that our actions and lifestyles have consequences in distant countries."

The diocese said the "no SMS day" seeks to draw attention especially to years of conflict in Congo fueled in part by the struggle for control of coltan mines. The mineral is an essential material in cell phones.

When the Kindle e-reader first appeared 14 months ago, Amazon-watchers were surprised to see the e-commerce giant redefine itself as a gadget maker. But Tuesday, when Amazon.com released a free application for the iPod and iPhone that allows users to read its e-books on those devices, it cemented its original book-selling mission.

In other words, it's all about the content.

The Kindle software for the iPhone and iPod, which Amazon.com (nasdaq: AMZN - news - people ) Chief Executive Jeff Bezos first hinted at during the release of the Kindle 2 last month, allows users to buy and read any of Amazon 230,000 e-books on any of the three devices and seamlessly move them among the gadgets.

While the software gives up the Kindle's exclusive hold on Amazon's digital catalog, it taps into a potentially much larger audience for Amazon's e-books--Apple (nasdaq: AAPL - news - people ) has sold around 15 million iPhones, while Amazon had sold only around 500,000 Kindles at last count, according to an estimate by Citigroup analyst Mark Mahaney. And that, says Forrester Research analyst James McQuivey, means Amazon has definitively focused on selling e-books above selling e-readers.

"This puts a stake in the ground around the idea that they really want you to be able to access the content you buy from them on any platform. And that's something we haven't seen other major media initiatives do," McQuivey says.

Apple's iTunes store, by contrast, has traditionally sold content tied to its music players--a bid to sell more hardware rather than content. Amazon, McQuivey says, has now made clear it's taking the opposite approach. "Amazon is saying, 'This is about books. We want you to feel that you can read our books anywhere, and we want you to buy more of them,'" McQuivey says. "They're saying, 'We're not a Kindle maker. We're a content provider and a content liberator.'"

Amazon may be liberating its content, but it's not liberating its hardware. Even as the company's book-selling platform expands, it's not likely to become compatible with other content providers. That could give the e-retailer a stranglehold on the budding market for e-books, a strategy likely to rankle publishers.

In an essay for Forbes last month, tech publisher Tim O'Reilly criticized Amazon's decision to close the Kindle to non-Amazon content (see "Why Kindle Should Be An Open Book"). Unless the company opened the Kindle to formats like epub, which work across a variety of non-Amazon-sanctioned devices, the Kindle would become irrelevant in two or three years, he predicts.

Apple Inc. introduced a refreshed line of Macintosh desktop computers Tuesday that the company touted as more affordable, even though price tags for all but one model top $1,000.

The rollout, which many analysts expected to come this year, included a price cut to the low end of the iMac line of desktops with built-in monitors. A version with a 20-inch screen starts at $1,199, $300 less than the previous generation. The 24-inch model starts at $1,499.

Apple (nasdaq: AAPL - news - people ) unveiled a long-rumored update to the Mac Mini, a petite computer sold without a monitor, keyboard or mouse. The company's cheapest computer, at $599, was updated with a faster graphics processor and the ability to run more than one monitor at a time. In a press release, Apple also promoted the Mini's energy efficiency and said it draws less than 13 watts of power when idle, or about one-tenth the power of a typical machine.

The company also overhauled its professional-grade work horse, the Mac Pro, with a quad-core processor from Intel Corp. (nasdaq: INTC - news - people ), while cutting its price by $300 to $2,499. An eight-core version starts at $3,299.

Apple has long focused on selling higher-end computers to consumers willing to pay extra for beautiful design. To date, Apple has made few concessions to the global economic crisis that's crimping consumer spending, and strong sales overseas during the holiday quarter helped offset a slower shopping season in the United States.

Apple's Mac line, which also includes laptops, fared better than the overall PC market in the last three months of 2008.

But Apple's moderate price changes don't seem to reflect the growing severity of the downturn, which could make 2009 the worst year on record for computer sales, according to estimates out Monday from research group Gartner Inc. (nyse: IT - news - people )

And so far, Apple has stayed away from the one fast-growing PC category, netbooks, or cheap, low-powered notebooks that have been a hit with recession-bitten consumers. Those machines start well below $300.

Ten Surprising Sale Items

Lauren Sherman, 03.03.09, 04:00 PM EST

Prices of luxury goods and services are being knocked down to earth with unprecedented discounts.

WASHINGTON, D.C.--The White House's $3.6 trillion budget, outlined Thursday, provides a broad plan for government spending during the next decade and a road map for slashing the deficit from $1.75 trillion to $533 billion by 2013. But its true value may be in what it says about how Americans will be taxed during that same period.

Specifics of the Obama administration's budget plan won't be unveiled until April--standard procedure for a first-year president. But many of the broad strokes are campaign promises finally put to paper, causing worry from some quarters of the business community. "There's a significant business tax increase suggested in this budget," says Clint Stretch, a tax expert at Deloitte Tax LLP in Washington.

Among them is the closure of tax "loopholes" for the oil and natural gas industries, raising revenue by $32 billion over the next decade. In part, the money would come from reinstating an excise tax on oil and gas from the Gulf of Mexico. It would take away a tax deduction that treats oil and gas as manufactured goods. And it would repeal provisions that allow some drilling costs to be counted as expenses instead of an investment.

The industry, obviously, is not happy. "New taxes could mean fewer American jobs and less revenue at a time when we desperately need both," says Jack Gerard, president of the American Petroleum Institute. Less revenue? Higher taxes would discourage oil and natural gas investment domestically, sending it overseas, he argues.

Another major concern is a very vague line item that calls for better implementation of international tax enforcement, reform of tax deferral for income earned and kept overseas, and "other tax reform policies." It's expected to raise revenues by $210 billion during the next 10 years.

Business groups don't like what they see. "We've all been invited to the dinner, but some of us turn out to be the main course," says Martin Regalia, chief economist for the U.S. Chamber of Commerce.

Of course, not all proposals affecting business are tax hikes. As he proposed on the campaign trail, Obama's budget calls for an elimination of capital gains taxes on small businesses, which would begin to take effect in 2014. A permanent expansion of the "research and experimentation" tax credit would take effect in 2010, costing $74.5 million over a 10-year period.

Also assumed is an expansion of a tax provision that allows businesses to carry back current losses to prior years when they were profitable. That means they can get big refunds from the Treasury now from the taxes they paid in their profitable years. The details aren't spelled out, but PriceWaterhouseCoopers tax expert Lindy Paull says the figures indicate that the "carryback" period will be five years for all businesses.

Economic output in the United States shrank more than feared during the last quarter of 2008, raising new questions on the country's path to recovery.

On Friday, the U.S. Commerce Department revised its fourth-quarter gross domestic product reading downward, to a 6.2% drop. At the end of January, the government had initially reported a GDP contraction of 3.8%, but that figure was less severe than the 5.4% annualized contraction Wall Street had been predicting for the last three months of the year. (See "U.S. GDP: Less Ugly Than Feared.")

"It was a really lousy report, but we expected that," said David Wyss, chief economist at Standard and Poor's, "and it can be added to all the other really lousy reports we've had this week." (See "U.S.: Jobless Up, Factory Orders Down, Nobody's Home.")

Most of the revision came from inventories. "There was also a fairly significant downward revision in trade, particularly exports," Wyss said.

Friday's reading was the worst since the 6.4% drop in recorded the first quarter of 1982, when the country was suffering a severe recession. This time around, the U.S. economy has been sucked into a housing, credit and financial conflagration that led to widespread job losses and a massive pullback in spending. (See "Rebuilding Global Markets.")

The government also reported that personal consumption fell by 4.3%, which was also below the 3.7% drop anticipated by Wall Street.

Friday's report added insult to injury for the U.S. markets, which also had to had to also grapple with the news of Citigroup (nyse: C - news - people ) reaching a deal with the U.S. government, in which the Treasury would convert up to $25.0 billion in Citigroup preferred shares to common. (See "Citi Nears Rescue From Uncle Sam.")

U.S. stocks recovered from deep losses in late-morning trading, while the yield on the benchmark 10-year U.S. Treasury note rose to 3.02%, from 2.98% Thursday

WASHINGTON (Reuters) - A top U.S. bank regulator voted Friday to expand its federal guarantee program to include banks' mandatory convertible debt.

The Federal Deposit Insurance Corp Friday voted to make a "very narrow targeted improvement" to its Temporary Liquidity Guarantee Program (TLGP) and separately voted to increase the fees it charges banks to insure deposits.

The FDIC established the voluntary guarantee program in October. It provides a government guarantee on certain senior unsecured debt and on banks' transaction deposit accounts. (Reporting by Karey Wutkowski and John Poirier, editing by Gerald E. McCormick)

Copyright 2009 Reuters, Click for

Citigroup shares dived in pre-market trading on Friday after the bank confirmed that U.S. taxpayers would take on a bigger share of the bank as the U.S. government sought to bolster its capital.

Citigroup (nyse: C - news - people ) and the government have reached a deal to convert up to $25.0 billion in government-held preferred shares in the bank into common equity, the bank confirmed Friday. The deal would see the government's voting stake in Citigroup rise to as much as 36.0%, from the current level of 7.0%. This will be accompanied by an infusion of new members on the bank's board, giving it a majority of independent directors, the bank's chairman Richard Parsons said Friday.

Shares of Citigroup plunged 38.2%, or 94 cents, at $2.46, in pre-market trading Friday, suggesting investors feared further dilution of their shareholdings.