A Backdoor Nationalization
The latest Treasury brainstorm will retarrd a banking recovery
I started doing my research on this after watching Glenn Beck on Monday with his guest Michelle Bachman. Congress woman Bachman explained it so well and described how Obama is talking about squeezing more money out of the TARP Funds for the banks by stretching what is left of the existing 700 Billion dollar bailout by converting it to "Common Stocks".
Well if your like me, I had no idea what a "Common Share" was as opposed to a shall we say, "Non-Common Share", but its not called a "Non-Common Share", its actually called a "Preffered Share". You see with "Common Shares" there are no beneifits for us the taxpayers, after all it is our money, right? However, if it remains "Preferred Shares" as it is now, than there are dividends to be had technically by us the taxpayers.
Also another key issue is that when the shares change from Preffered to Common and no longer recieve dividends than in the long run ,(real long run, I'm sure) when eventually the banks do return to making money, and paying dividends, than the taxpayers don't get their share of the dividends either. But if the shares remain as Preffered than the taxpayers are first in line to get paid back, or in plain english our Tax Kitty is the first thing to get paid back, persae.
The big kicker is that the Common Shares have the voting rights, so essentially the Gvoernemnt will own those banks that take or took the TARP money.
This is just another dirty ploy to nationalize the banks, as Glenn Beck described it, it is "Back Door Nationalization", another form of Progressivism, where all buisinesses and banks are controlled by the Federal Governmnet.
From WSJ
Just when you think the political class may have lear
ned something in months of trying to fix the banking system, the ghost of Hank Paulson returns to haunt the Treasury. The latest Beltway blunder -- and it would be a big one -- is the Obama Administration's weekend news leak that it may insist on converting its preferred shares in some of the nation's largest banks into common equity.
The stock market promptly tumbled by more than 3.5% yesterday, with J.P. Morgan falling 10% and financial stocks as a group off 9%, as measured by the NYSE Financials index. Note to White House: Sneaky nationalizations aren't any more popular with investors than the straightforward kind.
The occasion for this latest nationalization trial balloon is the looming result of the Treasury's bank strip-tease -- a.k.a. "stress tests." Treasury is worried, with cause, that some of the largest banks lack the capital to ride out future credit losses. Yet Secretary Timothy Geithner and the White House have concluded that they can't risk asking Congress for more bailout cash.
Voila, they propose a preferred-for-common swap, which can conjure up an extra $100 billion in bank tangible common equity, a core measure of bank capital. Not that this really adds any new capital; it merely shifts the deck chairs on bank balance sheets. Why Treasury thinks anyone would find this reassuring is a mystery. The opposite is the more likely result, since it signals that Treasury no longer believes it can tap more public capital to support the financial system if the losses keep building.
Worse, wholesale equity conversion would mean the government owns a larger share of more banks and is more entangled than ever in their operations. Giving Barney Frank more voting power is more likely to induce panic than restore confidence. Simply look at the reluctance of some banks -- notably J.P. Morgan Chase -- to participate in Mr. Geithner's private-public toxic asset sale plan. The plan is rigged so taxpayers assume nearly all the downside risk, but the banks still don't want to play lest Congress they become even more subject to political whim.
A backdoor nationalization also creates more uncertainty, not less, by offering the specter of an even lengthier period of federal control over the banking system. And it creates the fear of even more intrusive government influence over bank lending and the allocation of capital. These fears have only been enhanced by the refusal of Treasury to let more banks repay their Troubled Asset Relief Program (TARP) money.
Read the rest HERE
Well if your like me, I had no idea what a "Common Share" was as opposed to a shall we say, "Non-Common Share", but its not called a "Non-Common Share", its actually called a "Preffered Share". You see with "Common Shares" there are no beneifits for us the taxpayers, after all it is our money, right? However, if it remains "Preferred Shares" as it is now, than there are dividends to be had technically by us the taxpayers.
Also another key issue is that when the shares change from Preffered to Common and no longer recieve dividends than in the long run ,(real long run, I'm sure) when eventually the banks do return to making money, and paying dividends, than the taxpayers don't get their share of the dividends either. But if the shares remain as Preffered than the taxpayers are first in line to get paid back, or in plain english our Tax Kitty is the first thing to get paid back, persae.
The big kicker is that the Common Shares have the voting rights, so essentially the Gvoernemnt will own those banks that take or took the TARP money.
This is just another dirty ploy to nationalize the banks, as Glenn Beck described it, it is "Back Door Nationalization", another form of Progressivism, where all buisinesses and banks are controlled by the Federal Governmnet.
From WSJ
Just when you think the political class may have lear
ned something in months of trying to fix the banking system, the ghost of Hank Paulson returns to haunt the Treasury. The latest Beltway blunder -- and it would be a big one -- is the Obama Administration's weekend news leak that it may insist on converting its preferred shares in some of the nation's largest banks into common equity.
The stock market promptly tumbled by more than 3.5% yesterday, with J.P. Morgan falling 10% and financial stocks as a group off 9%, as measured by the NYSE Financials index. Note to White House: Sneaky nationalizations aren't any more popular with investors than the straightforward kind.
The occasion for this latest nationalization trial balloon is the looming result of the Treasury's bank strip-tease -- a.k.a. "stress tests." Treasury is worried, with cause, that some of the largest banks lack the capital to ride out future credit losses. Yet Secretary Timothy Geithner and the White House have concluded that they can't risk asking Congress for more bailout cash.
Voila, they propose a preferred-for-common swap, which can conjure up an extra $100 billion in bank tangible common equity, a core measure of bank capital. Not that this really adds any new capital; it merely shifts the deck chairs on bank balance sheets. Why Treasury thinks anyone would find this reassuring is a mystery. The opposite is the more likely result, since it signals that Treasury no longer believes it can tap more public capital to support the financial system if the losses keep building.
Worse, wholesale equity conversion would mean the government owns a larger share of more banks and is more entangled than ever in their operations. Giving Barney Frank more voting power is more likely to induce panic than restore confidence. Simply look at the reluctance of some banks -- notably J.P. Morgan Chase -- to participate in Mr. Geithner's private-public toxic asset sale plan. The plan is rigged so taxpayers assume nearly all the downside risk, but the banks still don't want to play lest Congress they become even more subject to political whim.
A backdoor nationalization also creates more uncertainty, not less, by offering the specter of an even lengthier period of federal control over the banking system. And it creates the fear of even more intrusive government influence over bank lending and the allocation of capital. These fears have only been enhanced by the refusal of Treasury to let more banks repay their Troubled Asset Relief Program (TARP) money.
Read the rest HERE
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