Citigroup has several viable options to raise capital: It can expand the exchange offer already on the tables and it can sell more assets. The fact is it will have to do both. The Financial Times reports that the bank "could sell several units and had not ruled out shedding businesses it deemed as core to its strategy of being a global financial group."

There are lots of discussions with the government underway but you get the feeling that the need for more capital is clear; Citigroup may be able to reduce the amount. But if you start selling off more revenue-producing assets, you end up shrinking future earnings, which would have to be spread over a lot more shares. At some point, some might argue that it would make more sense to sell off all pieces of the empire--the ultimate break-up. One issue is whether the government will ever be made whole on its massive investment. As it looks now, despite all the rhetoric about repaying TARP funds, it will take a long time for the government to recoup its investment. 

For more:
- here's the FT article

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