Citigroup Inc. on Wednesday finalized an agreement with the federal government that clears the way for its highly diluted stock exchange to take place, boosting common-equity levels and giving the U.S. a one-third stake in the banking giant.

Assuming full conversion rates, Citigroup will swap some $58 billion of preferred stock and trust-preferred securities into common stock, boosting shares outstanding some 75% when completed around July 30. After which, "Citi will be among the best capitalized banks in the world," said Chief Executive Vikram Pandit.

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