There´s no escaping the fact that Citigroup is now essentially under government control, but its fate isn´t turning out to be as black as some observers had feared. Now it´s capitalized, with a more respectable market value and a satisfying level of tangible common equity, not to mention a solid Tier 1 capital ratio. As the market prepared to open this morning, it was clear that Citi shareholders weren´t going to have a happy Friday but they may be the only group with something to complain about following the conversion of part of the government´s preferred stake into common shares.

"This is starting to look a little like the Fannie Mae-Freddie Mac conservatorship," said Chris Low, the chief economist for First Horizon National Corp.'s FTN Financial Capital Markets. "But now that we´ve got a little perspective on the Fannie-Freddie conservatorship, it´s working. The companies are still functioning; they´re still providing liquidity to the mortgage market, it´s just the shareholders are dead and buried."

Mr. Low said keeping Citi alive in the same way the government has kept the government-sponsored enterprises running would help the market remain stable. "Citi´s primary function is to provide loans and they are still, in terms of assets, the biggest bank in America," he explained. "Those loans will still be there. The FDIC is spared the burden of having to pay off depositors, which it couldn´t even begin to do, the threat of runs to other banks is averted."

The public acceptance of Citi´s fate has also changed-for the better, in Mr. Low´s view.

"It does show how expectations have shifted," he said. and "I think people would have been pretty irate about shareholders getting shafted had this happened six months ago, but now I think we´re all so aware of the problem that it´s OK as long as Citi is still functional and still providing credit to the markets.

"When Fannie and Freddie were rescued last year, the shareholder wipeout was the primary focus of commentary and now it´s a footnote."

Just because the market´s comfortable with Citi´s effective shareholder wipeout, however, doesn´t mean that anxiety about similar moves at other banks has dissipated.

"When the CEO of the bank is on the front page of the Wall Street Journal begging some bureaucrat to keep his job, it´s pretty clear whose in control at Citi-it´s already been nationalized," Mr. Low said. "The question is how far does the Treasury Department go with other banks. The stock market´s essentially given up at Citi. Whether or not it´s fully nationalized is not an issue at Citi-it still is at Bank of America."