Outrage is filtering through the blogosphere on the news that the U.S. government will substantially increase its stake in Citigroup.

Several financial bloggers are frustrated that the government’s repeated interventions — providing more than $50 billion in capital and a backstop on more than $300 billion in troubled assets — haven’t been enough to stop its decline. They’re doubtful that the latest strategy will do the trick either.

The plan announced Friday would ultimately give the government a 36% stake in the troubled bank while also wiping out three-quarters of existing shareholders’ stake. As part of the process, Citigroup will stop paying dividends on most of its preferred shares.

“Losers double down. That’s the classic trading rule which the USA is about to violate in an enormous way,” Barry Ritholtz, chief executive and director of equity research at Fusion IQ, wrote in a blog post. Mr. Ritholtz, a strong proponent of bank nationalization, noted that Citi now has access to an “infinite amount of capital,” at taxpayers’ expense.

Citigroup aims to convert $52.5 billion in preferred shares, including up to $25 billion held by the government and $27.5 billion held by private investors, into common stock. The conversion rate for swapping the preferred stock to common shares is $3.25, a 32% premium to Thursday’s closing price.

Bloggers are also miffed that the government is demanding that Citigroup replace some, but not all, of its board of directors, while Chief Executive Vikram Pandit is expected to keep his job. “Why isn’t Uncle Sam also asking for all board members to resign?” Yves Smith, author of the “naked capitalism” blog, asked in a post Friday. “Frankly, any Citi board member should be ashamed of his abject failure to oversee the company adequately.”

Henry Blodget, the disgraced former equity analyst turned blogger, said the new board won’t keep Citigroup asset values from falling and that the bank will soon need more money. Blodget added in a blog post at Clusterstock that the government should have forced Citigroup to write down the value of its assets to “nuclear-winter levels,” while then converting Citigroup debt to equity. He said the government doesn’t want to send panic through the bank debt market by alerting bank debt holders that their bonds aren’t as safe as Treasury securities.

Citigroup shares, which earlier Friday hit their lowest level since November 1990, were recently down 37% at $1.55. David Trone, an analyst at Fox-Pitt Kelton, said in a note to investors that, while Citigroup’s asset-risk profile remains high, the stock should eventually get back to $3 “once the emotion of the moment passes and technical factors are cleared out.”