WRAPUP 5-Citigroup gets new rescue, U.S. may own 36 pct

* Government to convert up to $25 bln of preferred shares

* White House says higher U.S. stake will help bank

* CEO says remains in charge, no nationalization

* Shares slide 39 percent (Adds White House and credit agency comments; closing prices)

By Jonathan Stempel and David Lawder

NEW YORK/WASHINGTON, Feb 27 (Reuters) - The U.S. government will boost its equity stake in Citigroup Inc (C.N) to as much as 36 percent, bolstering the bank's capital base in the latest emergency effort to save the banking giant.

In its third attempt to prop up Citigroup in the past five months, the government will convert up to $25 billion in preferred shares to common stock. Existing shareholders could see their ownership of the bank diluted by 74 percent.

While the latest rescue does not inject more money into Citigroup, it gives the government more of a voting stake and far greater influence over the bank's operations, short of outright nationalization. The White House said a higher U.S. stake will help achieve a "better outcome" for the bank.

"The government is the new boss," said Mike Holland, the founder of money manager Holland & Co in New York. "Every major decision is something that is not going to come out of Park Avenue, but is going to come from Washington, D.C."

New York-based Citigroup in October and November received $45 billion of taxpayer money, as well as a government backstop to cap losses on $301 billion of toxic assets.

Shares of Citigroup closed down 39 percent on Friday, and touched their lowest level in at least 18 years. The market value of what was once the world's most valuable bank has fallen to $8.2 billion, Reuters data show, from a peak above $270 billion roughly two years ago.

U.S. Bancorp's (USB.N) market value is more than three times greater than Citigroup's, though the regional bank's asset base is only one-seventh as large.

Moody's Investors Service cut Citigroup debt one notch to "A3," its fourth-lowest investment grade, saying Citigroup is likely to shrink, "which could diminish its relative importance to the U.S. banking system over the long run." Standard & Poor's affirmed its "A" rating, a notch higher.

(For a graphic on Citi's decline, see: here)

CEO SAYS STILL IN CHARGE

Friday's agreement calls for Citigroup to offer to exchange common stock for up to $27.5 billion of its preferred shares at $3.25 per share. The government will match the exchange up to $25 billion, provided private investors do the same.