Crippled banks in Europe and the United States sank deeper into state control on Friday as governments fed them more cash to stabilize lending and kickstart faltering economies worldwide.

The U.S. government did a deal to convert $25 billion of its preferred stock in Citigroup to common stock, giving it a stake of up to 36 percent in the bank.

And global development banks launched a two-year plan to lend up to 25 billion euros ($32 billion) to shore up banks and businesses in crisis-hit eastern and central Europe.

U.S. stock index futures turned lower on the news and Citi, which once dominated U.S. financial services, said it would take an impairment charge of $9.6 billion.

The Citi deal came a day after Britain agreed to insure 500 billion pounds ($715 billion) of risky bank assets and struck a deal that could raise the government holding in Royal Bank of Scotland to 95 percent..

On Friday, a second major British institution, Lloyds Banking Group, prepared to tap the insurance scheme.

Together with the $1.75 trillion budget deficit forecast by President Barack Obama, the deals highlight the lengths to which governments are prepared to go to rescue the financial industry and the broader economy.

"There’s a feeling that the banks might need yet more capital and nationalization is back on the agenda both here and in the U.S., it looks as if there’s no end in sight," said Graham Exton, fund manager at the UK’s Tilney Investment Management.

Fannie Mae, the government-controlled company seen by the U.S. administration as a key conduit to stabilize the housing market, reported a $25.2 billion fourth-quarter loss, forcing it to ask for $15.2 billion from the U.S. Treasury.

(Reuters)