Bernanke says no plans to nationalise Citigroup

Federal Reserve Chairman Ben Bernanke testifies to the House Financial Services Committee in Washington, DC, February 25, 2009. REUTERS/Joshua Roberts

WASHINGTON (Reuters) - Federal Reserve Chairman Ben Bernanke said on Wednesday there was no plan to nationalise troubled U.S. bank Citigroup C.N, causing stocks on Wall Street to trim losses.

“Nationalisation to my mind is when the government seizes the bank, zeros out the shareholders and begins to manage and run the bank, and we don’t plan anything like that,” Bernanke said during his semi-annual testimony to Congress.

“It may be the case that the government will have a substantial minority share in Citi or other banks, but again we have the tools ... make sure that we get the good results we want .. without all the negative impact of going through a bankruptcy process of some kind of or seizure.”

Speculation that the government would be forced to nationalise some troubled financial institutions, including Citigroup and Bank of America BAC.N, has weighed heavily on U.S. stocks in recent days. Stocks on Wednesday pared some loses on Bernanke's comments.

“This debate over nationalisation kind of misses the point,” said Bernanke, adding that there were two parts to the government’s rescue plan for the financial sectors.

These included ensuring stability and ability to lend, and using supervisory powers to make sure banks did not misuse the capital they received from the government and did not continue taking excessive risks, he said.

Reporting by Lucia Mutikani; Editing by Jonathan Oatis