“To be consistent with the last few government interventions, I don’t think Citigroup’s going to be allowed to fail,”

Here's a post on Bloomberg about Citigroup. I'm going to focus on a few points:

“Citi is in the category of ‘too big to fail,’” said Michael Holland, chairman and founder of Holland & Co. in New York, which oversees $4 billion. “There is a commitment from this administration and the next to do what it takes to save Citi.”

“To be consistent with the last few government interventions, I don’t think Citigroup’s going to be allowed to fail,” said William Fitzpatrick, an analyst at Optique Capital Management Inc. in Milwaukee, which oversees about $1 billion and doesn’t own Citigroup shares. “This company’s too intertwined with the rest of the financial system to allow any further deterioration.”

Notice two points:
1) Too big to fail.
2) Government intervention follows from earlier actions because of consistency expectations. This is a part of Political Economy that is hard to describe, because it flows from the particular circumstances of the event. That's the point I was trying to make about the automakers bailout.

“The market may be implying some sort of regulatory intervention,” Jason Goldberg, a former Lehman analyst who now works at Barclays Capital in New York, wrote in a note to clients yesterday. “In situations where the government has stepped in, the equity holders have not fared well.”

In other words, the downward movement of the price of the stock is because investors believe that their interests will be compromised by government intervention. Oddly, one can imagine government intervention helping the whole market, but hurting the stock of the company being helped out.