Oh thank god. It looks like King Paulson's actually going to take the advice of every g-damn economist out there and use the TARP money to purchase equity in banks rather than toxic assets. As Yves mentions though, he's not going far enough and not wiping out the existing equity shareholders. Y'know. It makes one think that King Paulson doesn't actually understand free-market economics. Hint: equity owners get upside rewards because they are also the risk bearers. When the banks are #FAIL, they are suppose to take their lumps, i.e. be wiped out of their ownership stake. *Doink*
Ok, so maybe some of the conservatives are not so keen on nationalizing the banks. Fine, then after the credit crisis is over and the banks are on solid footing, implement a plan to get the government out of the banking sector. As long as the gov't gets the taxpayer's moolah back, I'm fine with that (aren't you?).
*rolls eyes* Srsly, how dumb do you think we are?
From the NYTimes
Treasury officials say the just-passed $700 billion bailout bill gives them the authority to inject cash directly into banks that request it. Such a move would quickly strengthen banks’ balance sheets and, officials hope, persuade them to resume lending. In return, the law gives the Treasury the right to take ownership positions in banks, including healthy ones.
The Treasury plan was still preliminary and it was unclear how the process would work, but it appeared that it would be voluntary for banks.
The proposal resembles one announced on Wednesday in Britain. Under that plan, the British government would offer banks like the Royal Bank of Scotland, Barclays and HSBC Holdings up to $87 billion to shore up their capital in exchange for preference shares. It also would provide a guarantee of about $430 billion to help banks refinance debt.
I'm betting the markets react favorably tomorrow to this change in approach. It probably doesn't hurt that the Asian Bourses are muchly up as of right now (midnight-ish).
G'night peeps!
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